UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM N-6

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 File No.  333- 164118

Pre-Effective Amendment No. o

Post-Effective Amendment No. 1 þ

and

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 File No.  811-04460

Amendment No.    158 þ

(Check appropriate box or boxes.)

NATIONWIDE PROVIDENT VLI SEPARATE ACCOUNT 1

(Exact Name of Registrant)

NATIONWIDE LIFE INSURANCE COMPANY

(Name of Depositor)

(Formerly Issued by Nationwide Life Insurance Company of America)

One Nationwide Plaza, Columbus, Ohio 43215

(Address of Depositor's Principal Executive Offices)                                                                                                                     (Zip Code)

Depositor's Telephone Number, including Area Code (614) 249-7111

Name and Address of Agent for Service:

Robert W. Horner, III

Vice President and Secretary

One Nationwide Plaza, Columbus, Ohio  43215

Approximate Date of Proposed Public Offering May 1, 2010

It is proposed that this filing will become effective (check appropriate box)

o        immediately upon filing pursuant to paragraph (b)

þ        on May 1, 2010 pursuant to paragraph (b)

o        60 days after filing pursuant to paragraph (a)(1)

o        on (date) pursuant to paragraph (a)(1)

If appropriate, check the following box:

o        this post-effective amendment designates a new effective date for a previously filed post-effective amendment.

Options

INDIVIDUAL MODIFIED PREMIUM VARIABLE LIFE INSURANCE POLICY

ISSUED BY

NATIONWIDE LIFE INSURANCE COMPANY

Service Center: 5100 Rings Road, RR1-04- D 4, Dublin, Ohio 43017

Corporate Headquarters: One Nationwide Plaza, Columbus, Ohio 43215

Telephone: (800) 688 - 5177

Prospectus: May 1, 2010

This Prospectus describes an individual modified premium variable life insurance policy (the "Policy") originally offered by Nationwide Life Insurance Company of America ("NLICA").  The Policy has an insurance component and an investment component.  The primary purposes of the Policy are to provide insurance coverage for the lifetime of the Insured and to lessen the economic loss resulting from the Insured's death.  The Policy provides the policyowner (the "Owner") with flexibility as to premium payments subject to certain required premiums and the ability to choose among investment alternatives with different investment objectives.  The Policies were sold on a continuous basis until December 31, 2008 by licensed insurance agents in those states where the Policies could lawfully be sold.  Beginning January 1, 2009 no new Policies will be sold, but agents may continue to accept additional premium on existing Policies.

Effective following the close of business on December 31, 2009, Nationwide Life Insurance Company of America ("NLICA") merged with and into Nationwide Life Insurance Company ("NLIC").  Upon consummation of the merger, NLICA's separate corporate existence ceased by operation of law, and NLIC assumed legal ownership of all of the assets of NLICA, including the separate accounts funding the flexible premium adjustable survivorship variable life insurance policies (each a "Policy") formerly issued by NLICA, and the assets of those separate accounts.  As a result of the merger, NLIC became responsible for all liabilities and obligations of NLICA, including those created under the Policies; and the separate account that funds the benefits for your Policy, became a separate account of NLIC.  The Policies have thereby become variable life insurance policies funded by a separate account of NLIC, and each Policy Owner has become a Policy Owner of NLIC.

Please note:  The merger will not affect your rights under the Policy; there are no income tax consequences for you as a result of the merger; and you will not be charged any additional fees or expenses as a result of the merger.

Before January 1, 2010, the Policies were issued by NLICA, at that time a wholly owned subsidiary of Nationwide Financial Services, Inc. ("NFS"), a holding company.  NLICA was chartered by the Commonwealth of Pennsylvania in 1865 under the name Provident Mutual Life Insurance Company ("PMLIC").  On October 1, 2002, PMLIC converted from a mutual insurance company to a stock insurance company, changed its name to Nationwide Life Insurance Company of America, and became a wholly owned subsidiary of NFS, pursuant to terms of a sponsored demutualization.  Also, as a part of the sponsored demutualization, the Provident Mutual Variable Life Separate Account changed its name to the Nationwide Provident VLI Separate Account 1.

Nationwide Life Insurance Company ("NLIC") is a stock life insurance company organized under Ohio law in March, 1929, with its Main Administrative Office at One Nationwide Plaza, Columbus, Ohio 43215.  NLIC provides life insurance, annuities and retirement products.  NLIC is a wholly owned subsidiary of NFS.  NLIC is an indirect wholly owned subsidiary, and NFS a direct wholly owned subsidiary, of Nationwide Mutual Insurance Company.

After certain deductions are made, Net Premiums are allocated to the Nationwide Provident VLI Separate Account 1 (the "Separate Account").  The Separate Account is divided into subaccounts (the "Subaccounts"), which invest in shares of a designated corresponding investment Portfolio that is part of one of the mutual fund companies (the "Funds") listed below.  For a complete list of the available Subaccounts see "Appendix B : Portfolio Information."  For more information refer to the Fund's prospectus.

· Alger American Fund

· Fidelity Variable Insurance Products Fund

· MFS® Variable Insurance Trust II

· Nationwide Variable Insurance Trust

· Neuberger Berman Advisers Management Trust

· Van Eck Variable Insurance Products Trust

The Owner bears the entire investment risk; there is no guaranteed minimum value.

The accompanying prospectuses for the Funds describe the investment objectives and the attendant risks of the Portfolios.  The Cash Value will reflect monthly deductions and certain other fees and charges.  Also, a surrender charge may be imposed if, during the first 9 Policy Years the Policy lapses.  Generally, the Policy will remain in force as long as the scheduled premium payments are made.  If the "Special Premium Payment Provision" is in effect, the Owner will not have to pay the scheduled premiums to keep the Policy in force.

The Owner should consider the Policy in conjunction with other insurance he or she owns.  It may not be advantageous to replace existing insurance with the Policy, or to finance the purchase of the Policy through a loan or through withdrawals from another policy.

This prospectus must be accompanied or preceded by current prospectuses for the Funds.  Please read this prospectus carefully and retain it for future reference.

We offer a variety of variable universal life policies.  Despite offering substantially similar features and investment options, certain policies may have lower overall charges than others, including this policy.  These differences in charges may be attributable to differences in sales and related expenses incurred in one distribution channel versus another.

The Securities and Exchange Commission has not approved or disapproved these securities or the accuracy or adequacy of this prospectus.  Any representation to the contrary is a criminal offense.  The Policy is not a deposit or obligation of any bank, and no bank endorses or guarantees the Policy or policy values.  Neither the Federal Deposit Insurance Corporation nor any Federal agency insures or guarantees policy values or an Owner's investment in the Policy.

You should read your Policy along with this prospectus.

Table of Contents

	Page
Policy Benefits/Risks Summary	1
Policy Benefits	1
The Death Benefit
Transfers
Loan Privilege
Withdrawal of Excess Net Cash Value
Surrender of the Policy
Accelerated Death Benefit
Personalized Illustrations
Policy Risks	2
Investment Risk
Risk of Increase in Current Fees and Charges
Risk of Lapse
Tax Risks
Withdrawal and Surrender Risks
Loan Risks
Portfolio Risks	3
Fee Table	4
The Policy	8
The Company, Separate Account and Funds	8
The Company
The Separate Account
The Funds
Additional Information About the Funds and Portfolios
Addition, Deletion, or Substitution of Investments
Detailed Description of Policy Provisions	10
Death Benefit
Cash Value
Payment and Allocation of Premiums
Disruptive Trading
Transfers of Cash Value
Policy Duration
Options on Lapse
Exchange Privilege
Loan Privilege
Withdrawal of Excess Cash Value
Surrender Privilege
Charges and Deductions	20
Premium Expense Charge
Surrender Charges
Monthly Deductions
Mortality and Expense Risk Charge
Transfer Charge
Short-Term Trading Fees
Loan Interest Charge
Charge for Income Taxes
Guarantee of Certain Charges
Other Charges
Ownership and Beneficiary Rights	24
Modifying the Policy	24
Telephone, Fax, and E-Mail Requests	24
Dividends	24
Supplementary Benefits	25

Table of Contents (continued)

	Page
Federal Income Tax Considerations	25
Introduction
Tax Status of the Policy
Tax Treatment of Policy Benefits
In General
Modified Endowment Contracts
Distributions from Modified Endowment Contracts
Distributions from Policies that are not Modified Endowment Contracts
Multiple Policies
Policy Loans
Business Uses of the Policy
Tax Shelter Regulations
Withholding
Alternative Minimum Tax
Continuation of Policy Beyond Age 100
Other Policy Owner Tax Matter
Possible Tax Law Changes
Special Rules for Pension and Profit-Sharing Plans
Special Rules for 403(b) Arrangements
Same-Sex Marriage
Foreign Tax Credits
Accelerated Death Benefit Rider
Other Supplemental Benefits and Riders
Special Considerations For Life Insurance Policies Owned By Corporations or Other Employers
Split Dollar Arrangements
Voting Rights	29
Distribution of Policies	29
Policy Pricing
Information on Portfolio Payments
State Variations	31
Legal Proceedings	31
Financial Statements	34
Definitions	35
Appendix A – Calculation of Net Investment Factor and Cash Value of the Policy	37
Appendix B – Portfolio Information	38

POLICY BENEFITS/RISKS SUMMARY

The Policy is an individual modified premium variable life insurance policy.  The Policy is built around its Cash Value.  The Cash Value will increase or decrease depending on the investment performance of the Subaccounts, the premiums the Owner pays, the Policy fees and charges NLIC deducts, and the effect of any Policy transactions (such as transfers, withdrawal of excess Cash Value, and loans).  NLIC does not guarantee any minimum Cash Value.  The Owner could lose some or all of his or her money.

This summary describes the Policy's important benefits and risks.  The sections in the prospectus following this summary discuss the Policy's benefits and other provisions in more detail.  The Definitions at the end of the prospectus defines certain words and phrases used in this prospectus.

POLICY BENEFITS

The Death Benefit

As long as the Policy remains in force, NLIC will pay the Proceeds to the Beneficiary upon receipt of due proof of the death of the Insured.  The Proceeds will consist of the Policy's Death Benefit, plus any additional benefits provided by a supplementary benefit rider, less any outstanding Policy loan and accrued interest, less any unpaid Monthly Deductions.  So long as the required scheduled premiums are paid, the Death Benefit will not be less than the applicable Guaranteed Minimum Death Benefit.

The Death Benefit is the greatest of:

(1) the applicable Guaranteed Minimum Death Benefit for the Policy;

(2) the Face Amount of the Policy plus the amount by which the Cash Value on the date of death exceeds the appropriate Special Premium Payment Single Premium; or

(3) the Cash Value on the date of death times the Death Benefit Factor for the Insured's sex (if applicable), Attained Age, and Premium Class.

There are two Death Benefit options under the Policy – the Basic Death Benefit Option and the Increasing Death Benefit Option.  (The Increasing Death Benefit Option is subject to certain availability restrictions.)  The applicable Guaranteed Minimum Death Benefit depends upon which Death Benefit the owner chooses.  Under each of the Death Benefit options, the Guaranteed Minimum Death Benefit is as follows:

Basic Death Benefit Option:	the Face Amount of the Policy;
Increasing Death Benefit Option:	the Face Amount of the Policy plus the sum of all unscheduled premiums received by NLIC as of the date of death.

The Owner chooses at the time of application one of the two Death Benefit options.  NLIC will not issue the Policy until the Owner has elected a Death Benefit option.  If the Policy is issued with the Basic Death Benefit Option, the Owner may change to the Increasing Death Benefit Option only during the first Policy Year.  If the Increasing Death Benefit Option is chosen, the Owner may not change to the Basic Death Benefit Option.  A change in Death Benefit option may have tax consequences.

Transfers

The Owner may transfer Cash Value between and among the Subaccounts.  We charge $25 for the 5th and each additional transfer during a Policy Year.  Transfers between and among the Subaccounts are made as of the date NLIC receives the request.  NLIC requires a minimum amount of $100 for each such transfer.  (See "Transfers of Cash Value").  We may restrict the mode of communication of transfer requests to prohibit disruptive trading that is deemed potentially harmful to Policy Owners.

Loan Privilege

The Owner may obtain Policy loans in a minimum amount of $300 (or such lesser minimum as may be required in a particular state) , unless used to pay a scheduled premium.  T otal Policy loans may not exceed (1) for Policy Years 1 through 3, 75% of the cash surrender value (Cash Value less any applicable Surrender Charge); and (2) for Policy Years 4 and thereafter, 90% of the cash surrender value.  For Policies issued to Virginia residents, the policy loan available in all years will be 90% of the cash surrender value.

At the time of the application for the Policy, the Owner must elect one of two Policy loan interest rate options – either a fixed 8% rate per year or variable rate which will not exceed the greater of 5½ % per year or the Corporate Monthly Bond Yield Average as published by Moody's Investors Service, Inc.

If interest is not paid when due, it will be added to the outstanding loan balance, beginning 23 days after the Policy Anniversary.  NLIC transfers Cash Value in an amount equal to the loan to NLIC's General Account where it becomes collateral for the loan.  The transfer is made pro-rata from each Subaccount.  This collateral earns interest at an effective annual rate of 1.5% less than the annual rate then being charged for loans.  (See "Loan Privilege.")

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Depending upon the investment performance of the Subaccounts, and the amounts borrowed, loans may cause a Policy to Lapse.  Lapse of the Policy with outstanding loans may result in adverse tax consequences (see "Tax Treatment of Policy Benefits").

Withdrawal of Excess Net Cash Value

If the cash surrender value (Cash Value less any applicable Surrender Charge) of the Policy exceeds an amount called the Withdrawal Single Premium (which is the Attained Age net single premium for the Face Amount of the Policy) the Owner may be able to withdraw such excess Cash Value out of the Policy, subject to certain conditions.  A withdrawal will reduce the Death Benefit, but not below the Guaranteed Minimum Death Benefit.  (See "Withdrawal of Excess Cash Value," below.)  A withdrawal may have tax consequences.

Surrender of the Policy

The Owner may at any time surrender the Policy and receive the entire Net Cash Surrender Value.  (See "Surrender Privilege.")  A surrender may have tax consequences.

Accelerated Death Benefit

Under the Accelerated Death Benefit Rider, an Owner may receive, at his or her request and upon approval by NLIC, accelerated payment of part of the Policy's Death Benefit if the Insured develops a Terminal Illness or is permanently confined to a Nursing Care Facility.  NLIC will deduct an administrative charge from the accelerated death benefit at the time it is paid.  (See the "Accelerated Death Benefit" section.) The Federal income tax consequences associated with adding the Accelerated Death Benefit Rider or receiving the accelerated death benefit are uncertain.  The Owner should consult a tax adviser before adding the Accelerated Death Benefit Rider to the Policy or requesting an accelerated death benefit.

Personalized Illustrations

Owners will receive personalized illustrations that reflect their own particular circumstances.  These illustrations may help Owners to understand the long-term effects of different levels of investment performance and the charges and deductions under the Policy.  They also may help Owners compare the Policy to other life insurance policies.  These illustrations also show the value of premiums accumulated with interest and demonstrate that the Cash Value may be low (compared to the premiums paid plus accumulated interest) if an Owner surrenders the Policy in the early Policy Years.  Therefore, an Owner should not purchase the Policy as a short-term investment.  The personalized illustrations are based on hypothetical rates of return and are not a representation or guarantee of investment returns or Cash Value.

POLICY RISKS

Investment Risk

Because the Owner invests Cash Value in one or more Subaccounts, he or she will be subject to the risk that investment performance will be unfavorable and that the Cash Value will decrease.  In addition, NLIC deducts policy fees and charges from the Cash Value, which can significantly reduce the Cash Value.  During times of poor investment performance, this deduction will have an even greater impact on the Cash Value.  The Owner could lose everything he or she invests and the Policy could lapse without value, unless the Owner pays the scheduled premiums under the Policy.

Frequent trading in the Subaccounts may dilute the value of your Subaccount units, cause the Subaccount to incur higher transaction costs, and/or interfere with the Subaccount's ability to pursue its stated investment objective.  This disruption to the Subaccount trading may result in lower investment performance and cash value.  We have instituted procedures to minimize disruptive transfers, including, but not limited to, transfer restrictions and short-term trading fees.  While we expect these procedures to reduce the adverse effect of disruptive transfers, we cannot assure you that we have eliminated these risks.

Risk of Increase in Current Fees and Charges

Certain fees and charges are currently assessed at less than their maximum levels.  NLIC may increase these current charges in the future up to the guaranteed maximum levels.  If fees and charges are increased, the Owner may need to increase the amount and/or frequency of premiums to keep the Policy in force.

Risk of Lapse

If the Owner does not pay a scheduled premium (after the first scheduled premium) by its due date, the Policy may enter a 61-day Grace Period, beginning from the payment due date.  If the Special Premium Payment Provision is not in effect and the Automatic Premium Loan provision is not operative, the failure to pay a scheduled premium by the expiration of the Grace Period will cause the Policy to lapse as of the date the unpaid scheduled premium was due.  The Policy generally will not lapse if: (1) scheduled premiums are paid on or before their due dates or within the Grace Period (even if the investment experience of the Subaccounts has been so unfavorable that there is no Cash Value); (2) the Special Premium Payment Provision is in effect (e.g., if the Cash Value exceeds a particular amount), so that the Owner is not required to pay scheduled premiums to keep the Policy in full force (see "Special Premium Payment Provision"); or (3) the Automatic Premium Loan provision is in effect, so that any scheduled premium that has not been paid by the end of the Grace Period will be paid by a Policy loan (see "Automatic Premium Loan").

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Tax Risks

NLIC anticipates that a Policy should generally be deemed a life insurance contract under federal tax law.  However, due to limited guidance, there is some uncertainty about the application of the federal tax law to the Policy, particularly if the Owner of the Policy pays the full amount of premiums permitted under the Policy.  An Owner of a Policy issued after October 20, 1988 may, however, adopt certain self-imposed limitations on the amount of premiums paid for such a Policy which should cause the Policy to meet the definition of a life insurance contract.  Any Owner contemplating the adoption of such limitations should consult a tax adviser.  In addition, if the Owner elects the Accelerated Death Benefit Rider, the tax qualification consequences associated with continuing the Policy after a distribution is made are unclear.  The Owner should consult a tax adviser about these consequences.

Assuming that a Policy qualifies as a life insurance contract for federal income tax purposes, a Policy Owner should not be deemed to be in constructive receipt of Cash Value under a Policy until there is a distribution from the Policy.  Moreover, Death Benefits payable under a Policy should be excludable from the gross income of the Beneficiary.  As a result, the Beneficiary generally should not have to pay U.S. federal income tax on the Death Benefit, although other taxes, such as estate taxes, may apply.  (See "Federal Income Tax Considerations.")

Under certain circumstances, a Policy issued or materially changed after June 20, 1988 may be treated as a "Modified Endowment Contract."  If the Policy is a Modified Endowment Contract, then all pre-death distributions, including policy loans, will be treated first as a distribution of taxable income and then as a return of basis or investment in the Policy.  In addition, prior to age 59½ any such distributions generally will be subject to a 10% penalty tax.  (For further discussion of Modified Endowment Contracts, see "Tax Treatment of Policy Benefits.")

If the Policy is not a Modified Endowment Contract, distributions generally will be treated first as a return of basis or investment in the contract and then as disbursing taxable income.  Moreover, loans will generally not be treated as distributions.  Finally, neither distributions nor loans from a Policy that is not a Modified Endowment Contract are subject to the 10% penalty tax.  (See "Distributions from Policies Not Classified as Modified Endowment Contracts.")

Withdrawal and Surrender Risks

The Surrender Charge under the Policy applies for nine Policy Years after the Policy Date.  It is possible that the Owner will receive no Net Cash Surrender Value if the Policy is surrendered in the first few Policy Years.  A prospective Owner should purchase the Policy only if he or she as the financial ability to keep it in force for a substantial period of time.  A prospective Owner should not purchase the Policy if he or she intends to surrender all or part of the Cash Value in the near future.  NLIC designed the Policy to meet long-term financial goals.  The Policy is not suitable as a short-term investment.  A surrender or withdrawal of excess Cash Value may have tax consequences.

Loan Risks

A Policy loan, whether or not repaid, will affect Cash Value over time because NLIC subtracts the amount of the loan from the Subaccounts as collateral and holds it in NLIC's General Account.  This loan collateral does not participate in the investment performance of the Subaccounts.  NLIC reduces the amount it pays on the death of the Insured by the amount of any outstanding Policy loans and accrued interest.  A loan may have tax consequences.  In addition, if a Policy which is not a Modified Endowment Contract is surrendered or lapses while a Policy loan is outstanding, the amount of the loan, to the extent it has not previously been taxed, will be added to any amount received and taxed accordingly.

PORTFOLIO RISKS

A comprehensive discussion of the risks of each Portfolio may be found in each Portfolio's prospectus.  Please refer to the Portfolios' prospectuses for more information.  There is no assurance that any Portfolio will achieve its stated investment objective.

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FEE TABLE

The following tables describe the fees and expenses that an Owner will pay when buying, owning, and surrendering the Policy.  The first table describes the fees and expenses that an Owner will pay at the time that he or she buys the Policy, surrenders the Policy, or transfers Cash Value among the Subaccounts.

Transaction Fees
Charge	When Charge is Deducted	Amount Deducted
		Guaranteed Charge	Current Charge
Maximum Charge Imposed on Premiums (Premium Expense Charge):
Premium Tax Charge1	Upon receipt of each premium payment	0-4% of each scheduled Base Premium or unscheduled premium (after deducting the premium processing charge), depending on the Insured's state of residence	2.50% of each scheduled Base Premium or unscheduled premium (after deducting the premium processing charge)
Sales Charge	Upon receipt of each premium payment	5.00% of each scheduled Base Premium or unscheduled premium (after deducting the premium processing charge)	5.00% of each scheduled Base Premium or unscheduled premium (after deducting the premium processing charge)
Premium Processing Charge	Upon receipt of each premium payment	$1.00 from each premium payment	$1.00 from each premium payment
Maximum Deferred Surrender Charge:
Contingent Deferred Sales Charge2	Upon surrender or lapse during the first 9 Policy Years	During Policy Year 5, 9.00% of the lesser of: (1) the total premiums paid, less premium processing charges, to the date of surrender or lapse; or (2) the scheduled Base Premiums payable up to such date (or would have been payable up to such date if the Special Premium Payment Provision has been in effect)	During Policy Year 5, 9.00% of the lesser of: (1) the total premiums paid, less premium processing charges, to the date of surrender or lapse; or (2) the scheduled Base Premiums payable up to such date (or would have been payable up to such date if the Special Premium Payment Provision has been in effect)
Contingent Deferred Administrative Charge3	Upon surrender or lapse during the first 9 Policy Years	During Policy Years 1-5, $5.00 per $1,000 of Face Amount	During Policy Years 1-5, $5.00 per $1,000 of Face Amount
Short-Term Trading Fee4	Upon transfer of Subaccount value out of a Subaccount within 60 days after allocation to that Subaccount	1% of the amount transferred from the Subaccount within 60 days of allocation to that Subaccount	1% of the amount transferred from the Subaccount within 60 days of allocation to that Subaccount
Transfer Fees5	Upon Transfer	$25 per transfer	$25 per transfer
Accelerated Death Benefit Rider	Upon invoking this rider	$250	$100

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The next table describes the fees and expenses that a Policy Owner will pay periodically during the time that he or she owns the Policy, not including Portfolio fees and expenses.

Periodic Charges Other Than Portfolio Operating Expenses
Charge	When Charge is Deducted	Amount Deducted
		Guaranteed Charge	Current Charge
Cost of Insurance:6 Minimum and Maximum Charge	On Policy Date and monthly on Policy Processing Day	$0.06 - $458.71 per $1,000 of Net Amount at Risk per month	$0.05 - $121.67 per $1,000 of Net amount at Risk per month
Charge for a male Insured, Attained Age 45, in the nonsmoker Premium Class	On Policy Date and monthly on Policy Processing Day	$0.28 per $1,000 of Net Amount at Risk per month	$0.25 per $1,000 of Net Amount at Risk per month
First Year Policy Charge7	On Policy Date and monthly on Policy Processing Day	$5.00	$5.00
Monthly Administration Charge	On Policy Date and monthly on Policy Processing Day	$3.25 plus $0.015 per $1,000 of Face Amount	$3.25 plus $0.015 per $1,000 of Face Amount
Minimum Death Benefit Guarantee Charge8	On Policy Date and monthly on Policy Processing Day	$0.01 per $1,000 of the Guaranteed Minimum Death Benefit	$0.01 per $1,000 of the Guaranteed Minimum Death Benefit
Mortality and Expense Risk Charge	Daily	Annual rate 0.60% of the average daily net assets of each Subaccount in which the Owner is invested	Annual rate 0.60% of the average daily net assets of each Subaccount in which the Owner is invested
Loan Interest Charge9	On Policy Anniversary or earlier, as applicable10	Fixed annual rate of 8.00% or a variable loan interest rate equal to the greater of 5.50% or the Moody's Corporate Bond Yield Average-Monthly Average Corporates	Fixed annual rate of 8.00% or a variable loan interest rate equal to the greater of 5.50 % or the Moody's Corporate Bond Yield Average-Monthly Average Corporates

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Periodic Charges Other Than Portfolio Operating Expenses
Charge	When Charge is Deducted		Amount Deducted
			Guaranteed Charge	Current Charge
Optional Charges11
Accidental Death Benefit Rider: Minimum and Maximum Charge	Payable with the scheduled premium payment If the Special Premium Payment Provision is in effect, on the Policy Processing Day a scheduled premium otherwise would be due	Annual rate of $0.86 - $3.89 per $1,000 of rider coverage amount added to each scheduled premium payment If the Special Premium Payment Provision is in effect, an annual rate of $0.80 - $3.60 per $1,000 of rider coverage amount		Annual rate of $0.86 - $3.89 per $1,000 of rider coverage amount added to each scheduled premium payment If the Special Premium Payment Provision is in effect, an annual rate of $0.80 - $3.60 per $1,000 of rider coverage amount
Charge for an Insured, Issue Age 32, assuming monthly scheduled premium payments and the Special Premium Payment Provision is not in effect	Payable with the scheduled premium payment	$0.91 per $1,000 of rider coverage amount added to each scheduled premium payment		$0.91 per $1,000 of rider coverage amount added to each scheduled premium payment
Disability Waiver of Premium Benefit Rider: Minimum and Maximum Charge	Payable with the scheduled premium payment If the Special Premium Payment Provision is in effect, on the Policy Processing Day a scheduled premium otherwise would be due	Annual rate of $0.17 - $5.32 per $1,000 of Face Amount added to each scheduled premium payment If the Special Premium Payment Provision is in effect, an annual rate of $0.16 - $4.92 per $1,000 of Face Amount		Annual rate of $0.17 - $5.32 per $1,000 of Face Amount added to each scheduled premium payment If the Special Premium Payment Provision is in effect, an annual rate of $0.16 - $4.92 per $1,000 of Face Amount
Charge for an Insured, Issue Age 34, assuming monthly scheduled premium payments and the Special Premium Payment Provision is not in effect	Payable with the scheduled premium payment	$0.03 per $1,000 of Face Amount added to each scheduled premium payment		$0.03 per $1,000 of Face Amount added to each scheduled premium payment
Guaranteed Purchase Option Rider: Minimum and Maximum Charge	Payable with the scheduled premium payment If the Special Premium Payment Provision is in effect, on the Policy Processing Day a scheduled premium otherwise would be due	Annual rate of $0.68 - $2.60 per $1,000 of rider coverage amount added to each scheduled premium payment If the Special Premium Payment Provision is in effect, an annual rate of $0.63 - $2.40 per $1,000 of rider coverage amount		Annual rate of $0.68 - $2.60 per $1,000 of rider coverage amount added to each scheduled premium payment If the Special Premium Payment Provision is in effect, an annual rate of $0.63 - $2.40 per $1,000 of rider coverage amount

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Periodic Charges Other Than Portfolio Operating Expenses
Charge	When Charge is Deducted	Amount Deducted
		Guaranteed Charge	Current Charge
Charge for an Insured, Issue Age 0 assuming monthly scheduled premium payments, the Special Premium Payment Provision is not in effect and the Policy has the Disability Waiver of Premium Rider	Payable with the scheduled premium payment	$0.06 per $1,000 of rider coverage amount per month	$0.06 per $1,000 of rider coverage amount per month

The following table shows the minimum and maximum Total Annual Portfolio Operating Expenses, as of December 31, 2009 , that an Owner will pay periodically during the time that he or she owns the Policy.  The table does not reflect Short-Term Trading Fees.  More detail concerning each Portfolio's fees and expenses is contained in the prospectus for each Portfolio.

	Minimum	Maximum
Total Annual Portfolio Operating Expenses (expenses that are deducted from Portfolio assets, including management fees, distribution and/or service (12b-1) fees, and other expenses, as a percentage of average Portfolio assets)	0.33 %	1.44 %

The minimum and maximum Portfolio operating expenses indicated above do not reflect voluntary or contractual reimbursements and/or waivers applied to some Portfolios.  Therefore, actual expenses could be lower.  Refer to the Portfolio prospectuses for specific expense information.

 

1 NLIC does not deduct a premium tax charge in jurisdictions that impose no premium tax.

 

2 Beginning in the 6th Policy Year, the Contingent Deferred Sales Charge decreases each Policy Year to 0% after the 9th Policy Year.

 

3 Beginning in the 6th Policy Year, the Contingent Deferred Administrative Charge decreases each Policy Year to $0 after the 9th Policy Year.

 

4 The Short-Term Trading Fee is only assessed in connection with those Portfolios that assess a redemption fee to the Variable Account .  Subaccounts that may assess a Short-Term Trading Fee are identified in the " Appendix B: Portfolio Information " section of this prospectus .

 

5 We do not assess a transfer charge for the first 4 transfers each Policy Year.

6 Cost of Insurance Charges vary based on the Insured's Attained Age, sex, Premium Class, and Net Amount at Risk.  The Cost of Insurance Charges shown in the table may not be typical of the charges the Owner will pay.  The Policy's specifications page will indicate the guaranteed Cost of Insurance Charge applicable to the Policy, and more detailed information concerning the Owner's Cost of Insurance Charges is available on request from the Service Center.  Also, before the Owner purchases the Policy, NLIC will provide the Owner with personalized illustrations of future benefits under the Policy based upon the Insured's Issue Age and Premium Class, the Death Benefit option, Face Amount, scheduled premiums, and riders requested.

 

7 NLIC only deducts the First Year Policy Charge on the first 12 Policy Processing Days.

 

8 For a Policy with a Guaranteed Minimum Death Benefit of $50,000, the Minimum Death Benefit Guarantee Charge is $0.50 per month.

 

9 The maximum guaranteed net cost of loans is 1.50% annually (after offsetting the interest NLIC guarantees it will credit on loaned amounts, which is equal to an annual rate of 1.50% below the 8.00% fixed interest rate or variable loan interest rate).

 

10 While a policy loan is outstanding, loan interest is payable in arrears on each Policy Anniversary or, if earlier, on the date of loan repayment, lapse, surrender, policy termination, or the Insured's death.

11 Charges for the Accidental Death Benefit, Disability Waiver of Premium Benefit, and Guaranteed Purchase Option Riders may vary based on the Insured's Issue Age, Premium Class, premium mode, Face Amount, and rider coverage amount.  The rider charges shown in the table may not be typical of the charges the Owner will pay.  The Policy's specifications page will indicate the rider charges applicable to the Owner's Policy, and more detailed information concerning these rider charges is available on request from the Service Center.  Also, before the Owner purchases the Policy, NLIC will provide personalized illustrations of future benefits under the Policy based upon the Insured's Issue Age and Premium Class, the Death Benefit option, Face Amount, scheduled premiums, and riders requested.

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THE POLICY

The Individual Modified Premium Variable Life Insurance Policy offered by this prospectus is issued by NLIC.  The Policy is similar in many ways to a fixed benefit life insurance policy.   This prospectus discloses all material provisions of the policy.  In addition to the terms and conditions of the policy, policy owner rights are governed by this prospectus and protected by federal securities laws and regulations.   As with a fixed-benefit life insurance policy, the Owner of a Policy makes premium payments in return for insurance coverage on the person insured.  Also, like many fixed-benefit life insurance policies, the Policy will not lapse if scheduled premiums are paid and the Policy provides for accumulation of Net Premiums and a Net Cash Surrender Value which is payable if the Policy is surrendered during the Insured's lifetime.  As with many fixed-benefit life insurance policies, the Net Cash Surrender Value during the early Policy Years is likely to be substantially lower than the aggregate premium payments made.

However, the Policy differs from a fixed-benefit life insurance policy in several important respects.  Unlike a fixed-benefit life insurance policy, under the Policy, the Death Benefit may and the Cash Value will increase or decrease to reflect the investment performance of any Subaccounts to which Cash Value is allocated.  There is no guaranteed minimum Net Cash Surrender Value.  If scheduled premium payments are not made, then, after a Grace Period, the Policy will lapse without value.  (See "Policy Duration.")  However, if the "Special Premium Payment Provision" is in effect, the Owner will not be required to pay scheduled premiums to keep the Policy in full force.  Generally, this provision will take effect when the Cash Value exceeds a particular amount.  (See "Special Premium Payment Provision.")  If a Policy lapses while loans are outstanding, certain amounts may become subject to income tax.  (See "Federal Income Tax Considerations.")

The Policy is called "modified premium" because while there is a fixed schedule for premium payments, the Owner may, subject to certain restrictions, make additional unscheduled payments.

The Policy is designed to provide lifetime insurance benefits and long-term investment of Cash Value.  A prospective Owner should evaluate the Policy in conjunction with other insurance coverage that he or she may have, as well as their need for insurance and the Policy's long-term investment potential.  It may not be advantageous to replace existing insurance coverage with the Policy.  In particular, replacement should carefully be considered if the decision to replace existing coverage is based solely on a comparison of policy illustrations.

This Policy is issued for Insureds with Issue Ages 0-85.  The benefits described in the Policy and this prospectus, including any optional riders or modifications in coverage, may be subject to our underwriting and approval.  We reserve the right to reject any application for any reason permitted by law.  Additionally, we reserve the right to modify our underwriting standards on a prospective basis to newly issued policies at any time.  The minimum Face Amount is $50,000.  We reserve the right to modify the minimum Face Amount on a prospective basis to newly issued policies at any time. NLIC offers other variable life insurance policies that have different Death Benefits, policy features, and optional programs.  However, these other policies also have different charges that would affect the Owner's Subaccount performance and Cash Value.  To obtain more information about these other policies, contact NLIC's Service Center or the Owner's agent.

To the extent permitted by law, policy benefits are not subject to any legal process on the part of a third-party for the payment of any claim, and no right or benefit will be subject to the claims of creditors (except as may be provided by assignment).

It is important to remember the portion of any amounts allocated to our general account and any guaranteed benefits we may provide under the policy exceeding the value of amounts held in the separate account are subject to our claims paying ability.

In order to comply with the USA Patriot Act and rules promulgated thereunder, Nationwide has implemented procedures designed to prevent policies described in this prospectus from being used to facilitate money laundering or the financing of terrorist activities.

THE COMPANY, SEPARATE ACCOUNT AND FUNDS

The Company

Nationwide Life Insurance Company ("NLIC") is a stock life insurance company organized under Ohio law in March 1929, with its Main Administrative Office at One Nationwide Plaza, Columbus, Ohio 43215.  We provide life insurance, annuities and retirement products.  We are admitted to do business in all states, the District of Columbia and Puerto Rico.

NLIC is a wholly owned subsidiary of Nationwide Financial Services, Inc. ("NFS"), a holding company.  NLIC is an indirect wholly owned subsidiary, and NFS a direct wholly owned subsidiary, of Nationwide Mutual Insurance Company.

Before January 1, 2010, the Policies were issued by Nationwide Life Insurance Company of America ("NLICA"), at that time a wholly owned subsidiary of NFS.  NLICA was chartered by the Commonwealth of Pennsylvania in 1865 under the name Provident Mutual Life Insurance Company ("PMLIC").  On October 1, 2002, PMLIC converted from a mutual insurance company to a stock insurance company, changed its name to Nationwide Life Insurance Company of America, and became a wholly owned subsidiary of NFS, pursuant to terms of a sponsored demutualization.  Effective following the close of business on December 31, 2009, NLICA merged with and into NLIC, and NLIC was the surviving company.

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The Separate Account

The Separate Account is a separate investment account to which assets are allocated to support the benefits payable under the Policies as well as other variable life insurance policies NLIC may issue.   The Separate Account was originally established under Delaware law.  Upon closure of the merger of NLICA into NLIC on December 31, 2009, the Separate Account became subject to, and will be operated in compliance with, Ohio law.

The assets of the Separate Account are owned by NLIC.  However, these assets are held separate from other assets and are not part of NLIC's General Account.  NLIC is obligated to pay all benefits under the Policies.  The portion of the Separate Account's assets equal to the reserves and other liabilities under the Policies (and other policies) supported by the Separate Account are not chargeable with liabilities arising out of any other business that NLIC may conduct.  NLIC may transfer to its General Account any assets of the Separate Account that exceed the reserves and Policy liabilities of the Separate Account (which will always be at least equal to the aggregate Cash Value allocated to the Separate Account under the Policies).  The income, gains and losses, realized or unrealized, from the assets allocated to the Separate Account are credited to or charged against the Separate Account without regard to other income, gains or losses of NLIC.  NLIC may accumulate in the Separate Account the accrued charges for mortality and expense risks and investment results attributable to assets representing such charges.

The Separate Account is registered with the Securities and Exchange Commission ("SEC") under the Investment Company Act of 1940 (the "1940 Act") as a unit investment trust type of investment company.  Such registration does not involve any supervision of the management or investment practices or policies of the Separate Account by the SEC.  The Separate Account meets the definition of a "Separate Account" under federal securities laws.  The Separate Account has Subaccounts which each invest exclusively in Portfolios of one of the Funds. NLIC reserves the right to make structural and operational changes affecting the Separate Account.  (See "Addition, Deletion, or Substitution of Investments.")

NLIC does not guarantee any money that the Owner places in the Subaccounts.  The value of each Subaccount will increase or decrease, depending on the investment performance of the corresponding Portfolio.  The Owner could lose some or all of his or her money.

The Funds

Each of the Funds offered in this Policy is registered with the SEC under the 1940 Act as an open-end management investment company.  The SEC does not, however, supervise the management or the investment practices and policies of the Funds or their Portfolios.  The assets of each Portfolio are separate from the assets of other portfolios of that Fund and each Portfolio has separate investment objectives and policies.  Some of the Funds may, in the future, create additional Portfolios.  The investment experience of each Subaccount depends on the investment performance of its corresponding Portfolio.  For more detail about each Portfolio, refer to each Portfolio's prospectus and/or "Appendix B: Portfolio Information" later in this prospectus.

These Portfolios are not available for purchase directly by the general public, and are not the same as other mutual fund portfolios with very similar or nearly identical names that are sold directly to the public.  However, the investment objectives and policies of certain Portfolios available under the Policy are very similar to the investment objectives and policies of other portfolios that are or may be managed by the same investment adviser or manager.  Nevertheless, the investment performance of the Portfolios available under the Policy may be lower or higher than the investment performance of these other (publicly available) portfolios.  There can be no assurance, and NLIC makes no representation, that the investment performance of any of the Portfolios available under the Policy will be comparable to the investment performance of any other portfolio, even if the other portfolio has the same investment adviser or manager, the same investment objectives and policies, and a very similar name.

Additional Information About the Funds and Portfolios

No one can assure that any Portfolio will achieve its stated objectives and policies.

More detailed information concerning the investment objectives, policies and restrictions of the Portfolios, the expenses of the Portfolios, the risks attendant to investing in the Portfolios and other aspects of the Funds' operations can be found in the current prospectus for each Fund and the current Statement of Additional Information for the Funds.  The Funds' prospectuses should be read carefully and kept for future reference before any decision is made concerning the allocation of Net Premium or transfers of Cash Value among the Subaccounts.

NLIC (or an affiliate) may receive compensation from a Fund or its investment adviser or distributor (or affiliates thereof) in connection with administration, distribution, or other services provided with respect to the Funds and their availability through the Policies.  The amount of this compensation is based upon a percentage of the assets of the Fund attributable to the Policies and other policies issued by NLIC.  These percentages differ, and some Funds, advisers, or distributors (or affiliates) may pay NLIC or an affiliate more than others.  NLIC also may receive 12b-1 fees.

Addition, Deletion, or Substitution of Investments

Where permitted by applicable law, NLIC reserves the right to make certain changes to the structure and operation of the Separate Account without the Owner's consent, including, among others, the right to:

1. Remove, combine, or add Subaccounts and make the new Subaccounts available to the Owner at NLIC's discretion;

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2. Substitute shares of another registered open-end management company, which may have different fees and expenses, for shares of a Subaccount at NLIC's discretion;

3. Substitute or close Subaccounts to allocations of premiums or Cash Value, or both, and to existing investments or the investment of future premiums, or both, at any time in NLIC's discretion;

4. Transfer assets supporting the Policies from one Subaccount to another or from the Separate Account to another separate account;

5. Combine the Separate Account with other separate accounts, and/or create new separate accounts;

6. Deregister the Separate Account under the 1940 Act, or operate the Separate Account as a management investment company under the 1940 Act, or as any other form permitted by law; and

7. Modify the provisions of the Policy to reflect changes to the Subaccounts and the Separate Account and to comply with applicable law.

The particular Portfolios available under the Policies may change from time to time.  Specifically, Portfolios or Portfolio share classes that are currently available may be removed or closed off to future investment.  New Portfolios or new share classes of currently available Portfolios may be added.  Policy Owners will receive notice of any such changes that affect their Policy.  Additionally, not all of the Portfolios are available in every state.

The Funds, which sell their shares to the Subaccounts pursuant to participation agreements, also may terminate these agreements and discontinue offering their shares to the Subaccounts.  NLIC will not make any such changes without receiving any necessary approval of the Securities and Exchange Commission and applicable state insurance departments.  NLIC will notify the Owner of any changes.

Substitution of Securities. NLIC may substitute, eliminate, or combine shares of another underlying mutual fund for shares already purchased or to be purchased in the future if either of the following occurs:

(1)           shares of a current underlying mutual fund are no longer available for investment; or

(2)           further investment in an underlying mutual fund is inappropriate.

In April 2009 , NLIC filed an application with the SEC for an order permitting it to substitute assets allocated to certain underlying mutual funds into other underlying mutual funds available under the policy that have similar investment objectives and strategies.  If and when NLIC receives SEC approval for these substitutions, affected policy owners will be notified in advance of the specific details relating to the substitutions and will be given an opportunity to make alternate investment allocations.

No substitution of shares may take place without the prior approval of the SEC. All affected policy owners will be notified in the event there is a substitution, elimination or combination of shares.

Deregistration of the Separate Account. NLIC may deregister Nationwide Provident VLI SeparateAccount 1 under the 1940 Act in the event the separate account meets an exemption from registration under the 1940 Act, if there are no shareholders in the separate account or for any other purpose approved by the SEC.

No deregistration may take place without the prior approval of the SEC.  All policy owners will be notified in the event NLIC deregisters Nationwide Provident VLI Separate Account 1.

DETAILED DESCRIPTION OF POLICY PROVISIONS

Death Benefit

General.  As long as the Policy remains in force, the Proceeds of the Policy will, upon due proof of the Insured's death (and fulfillment of certain other requirements), be paid to the Beneficiary in accordance with the designated Death Benefit option.  The Proceeds will be determined as of the date of the Insured's death and will be equal to:

1. the Death Benefit; plus

2. any additional benefits due under a supplementary benefit rider attached to the Policy; minus

3. any loan and accrued loan interest on the Policy; minus

4. any overdue deductions if the death of the Insured occurs during the Grace Period.

The Proceeds may be paid in cash or under one of the Settlement Options set forth in the Policy.

Death Benefit Options.  The Policy provides two Death Benefit options.

Under the Basic Death Benefit Option, the Death Benefit is equal to the greatest of: (1) the Face Amount of the Policy; (2) the Face Amount of the Policy plus the amount by which the Cash Value of the Policy on the date of death exceeds the appropriate 7½% Special Premium Payment Single Premium; or (3) the Cash Value of the Policy on the date of death times the Death Benefit Factor shown in the Policy for the Insured's sex (if applicable), Attained Age and Premium Class.

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Under the Increasing Death Benefit Option, the Death Benefit is equal to the greatest of: (1) the Face Amount of the Policy plus the sum of all unscheduled premiums received by NLIC as of the date of death; (2) the Face Amount of the Policy plus the amount by which the Cash Value of the Policy on the date of death exceeds the appropriate 7½% Special Premium Payment Single Premium; or (3) the Cash Value of the Policy on the date of death times the Death Benefit Factor shown in the Policy for the Insured's sex (if applicable), Attained Age and Premium Class.

The Death Benefit is increased by the portion of any scheduled premium payment which applies to a period of time beyond the date of death.  The amount payable is reduced by any policy loans and accrued interest and, if the Insured dies during the Grace Period, by that part of any required but unpaid scheduled premium which applies to a period prior to the date of death.  The amount remaining after these adjustments is the Proceeds at death paid to the Beneficiary at the Insured's death.

Availability of Death Benefit Options.  The Death Benefit option is chosen by the Owner at the time of application for the Policy.  If the Policy is issued with the Basic Death Benefit, the Owner may change to the Increasing Death Benefit only during the first Policy Year.  Once the Increasing Death Benefit has been chosen, the Owner may not subsequently change to the Basic Death Benefit.  Changing the Death Benefit option may result in a change in Face Amount, and may have adverse tax consequences.  A tax adviser should be consulted before changing the Death Benefit option.

The Guaranteed Minimum.  As long as required scheduled premiums are paid, the Death Benefit is guaranteed never to be less than the applicable Guaranteed Minimum Death Benefit for the Policy.  For a Policy with the Basic Death Benefit, the Guaranteed Minimum Death Benefit is equal to the Face Amount of the Policy.  For a Policy with the Increasing Death Benefit, the Guaranteed Minimum Death Benefit is equal to the Face Amount of the Policy plus the sum of all unscheduled premiums received by NLIC as of the date of death.

How the Death Benefit May Vary.  For purposes of determining the Cost of Insurance Charge, the Death Benefit is determined on each Policy Processing Day based on the Cash Value of the Policy (see "How the Cash Value May Vary," below).  The Death Benefit will be adjusted to the date of death.  The Death Benefit and the Proceeds payable at the Insured's death, therefore, depend on the Cash Value of the Policy when the Insured dies.  Favorable investment experience and premium payments in excess of scheduled premiums may result in an increase in the Death Benefit.  Unfavorable investment experience may result in decreases in the Death Benefit, but never less than the Face Amount of the Policy.  The Death Benefit will also vary depending upon whether the Basic Death Benefit or the Increasing Death Benefit applies.

Accelerated Death Benefit.  Under the Accelerated Death Benefit Rider, the Owner may receive an accelerated payment of part of the Policy's Death Benefit when:  (1) the Insured develops a non-correctable medical condition which is expected to result in his or her death within 12 months; or (2) the Insured has been confined to a Nursing Care Facility for 180 days and is expected to remain in such a facility for the remainder of his or her life.

There is no additional periodic charge for this rider.  However an administrative charge, currently $100 and not to exceed $250, will be deducted from the accelerated death benefit at the time it is paid.  The federal income tax consequences associated with adding the Accelerated Death Benefit Rider or receiving the accelerated death benefit are uncertain.  The Owner should consult a tax adviser before adding the Accelerated Death Benefit Rider to the Policy or requesting an accelerated death benefit.

Cash Value

The Cash Value is not guaranteed.  Unless there is an outstanding policy loan, the total Cash Value of the Policy at any time is the sum of the Cash Values of the Subaccounts.  If there is an outstanding loan, the total Cash Value equals the Cash Value in the General Account attributable to the loan plus the Cash Values of the Separate Account.

As described below, the Cash Value of each Subaccount may increase or decrease daily depending on the investment experience of the Subaccounts, the deduction of charges from the Cash Value, and any other transactions (e.g., transfers, withdrawals, and loans).  Although the Policy offers the possibility of Cash Value appreciation, there is no assurance that such will occur.  It is also possible, due to poor investment experience, for the Cash Value to decline to zero.  NLIC does not guarantee a minimum Cash Value.  Therefore, the Owner bears all the investment risk on the Cash Value.

How the Cash Value May Vary.  The Cash Value of each Subaccount on the Policy Date is the portion of the Net Premium allocated to that Subaccount reduced by the portion of the Monthly Deduction on the first Policy Processing Day allocated to that Subaccount.  Thereafter, the Cash Value of each Subaccount changes on each Valuation Day.

The Cash Value of each Subaccount reflects a number of factors, including the investment performance of the Portfolio, the receipt of scheduled and unscheduled premium payments, transfers from and to other Subaccounts, transfers to and from the General Account for a policy loan and repayment, any withdrawal of excess Cash Value, the Monthly Deductions from Cash Value, and the daily charges against the Subaccounts.  For a Policy having the Increasing Death Benefit where unscheduled premiums are paid, the Cash Value may be slightly lower than that of the same Policy having the Basic Death Benefit.

Net Investment Factor.  Each Subaccount has its own net investment factor.  The net investment factor measures the investment performance of a Subaccount from one Valuation Day to the next.  The factor increases to reflect investment income and capital gains, realized and unrealized, for the securities of the underlying Portfolio.  The factor decreases to reflect any capital losses, realized and unrealized, for the securities of the underlying Portfolio.

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The asset charge for mortality and expense risks is deducted in determining the applicable net investment factor.

A description of how the net investment factor is determined and how it is reflected in the Cash Value of the Policy is set forth in Appendix A on Page 21.

Payment and Allocation of Premiums

Scheduled Premiums.  Scheduled premiums are payable during the Insured's lifetime on an annual basis or, if elected, more frequently.  If the Owner submits a premium payment to his or her agent, NLIC will not begin processing the premium until NLIC receives it from the agent's broker-dealer.  The scheduled premium is a level amount that does not change until the Premium Change Date (see "Premium Change Date").  If all required scheduled premiums are paid when due, the Policy will not lapse, even if adverse investment experience results in no Cash Value.  If the Special Premium Payment Provision is in effect, scheduled premiums do not have to be paid for the Policy to stay in full force.  (See "Special Premium Payment Provision".)  If that provision is not in effect, scheduled premiums must be paid to keep the Policy in full force.  (See "Grace Period for Payment of Scheduled Premiums.")

Amount of Scheduled Premiums.  The amount of scheduled premiums depends on the Face Amount of the Policy, the age of the Insured, the Insured's sex and Premium Class and the frequency of premium payments.  The amount of scheduled premiums payable on Policies issued in states which require "unisex" policies (currently Montana) or in conjunction with employee benefit plans depends on all of the preceding factors except for the sex of the Insured.

For purposes of calculating premium rates, there are three groupings or "bands" of Face Amount.  Each band has a different set of premium rates per $1,000 of Face Amount.  The bands are: $50,000 - 99,999; $100,000 - 249,999; $250,000 and over.  Generally, the premium rates per $1,000 of Face Amount will be lower for Policies in a higher Face Amount band.  Premiums generally are higher for Policies issued for older Insureds.  Premiums also are generally higher for male Insureds than comparable female Insureds.  The Premium Classes available are Standard, Non-Smoker, Non-Smoker with Extra-Premium and Extra-Premium.  Lower premiums are charged to non-smokers who are at least 22 years of age (21 years of age for Policies issued to residents of Texas).  Since there is no Non-Smoker class for Insureds under the age of 22, shortly before an Insured attains age 22, NLIC may notify the Insured about possible classification as a Non-Smoker.  If the Insured does not qualify for the Non-Smoker class or does not respond to the notification, the Insured's Premium Class will remain Standard and the monthly deduction for cost of insurance will be based on Smoker mortality tables (see "Cost of Insurance").  If the Insured does respond to the notification and qualifies as a Non-Smoker, the scheduled premium for the Policy will be reduced and the monthly deduction for cost of insurance will be based on Non-Smoker mortality tables.  Additional premiums are charged for a Policy with an extra-premium class and for any supplementary insurance benefits.  In certain situations, such as term conversions, where less than normal underwriting expenses are incurred, NLIC may allow a credit toward the first scheduled premium.

Representative annual Base Premium amounts payable from the Policy Date until the Premium Change Date for Non-Smoker and Standard Premium Classes are shown in the following table:

	$50,000 Face Amount		$100,000 Face Amount
	Non-Smoker	Standard	Non-Smoker	Standard
Male, Issue Age 25	395.50	503.50	765.00	982.00
Female, Issue Age 35	508.50	594.00	991.00	1,163.00
Male, Issue Age 45	905.00	1,216.00	1,783.00	2,405.00
Female, Issue Age 55	1,236.50	1,442.00	2,445.00	2,856.00

Premiums are payable on an annual, semi-annual or quarterly basis.  Premiums are payable monthly under the Automatic Payment Plan where the Owner authorizes NLIC to withdraw premiums from the Owner's checking account each month.  If premiums are payable under the Automatic Payment Plan and such plan is terminated, the premium payment frequency will be changed to quarterly.  The Owner may make deposits into a Premium Deposit Fund Account (PDF Account).  If the Owner has a PDF Account, NLIC will automatically apply the amount in such account toward payment of the scheduled premium due on the premium due date.  Any amounts held in a PDF Account earn interest at a fixed rate which will be declared by NLIC from time to time.

If scheduled premiums are paid more often than annually, the aggregate yearly premium will be higher.  Although it is not guaranteed that Owners who pay premiums annually and those who pay more frequently than annually will achieve the same Cash Values, the higher premium for those who pay premiums more frequently is intended to decrease the likelihood that the Cash Values for such Owners will be significantly different than those of annual payors.

Since NLIC deducts a premium processing charge of $1.00 from each premium payment, Policies for which premiums are paid more frequently than annually will incur higher aggregate premium processing charges than Policies with premiums paid annually (see "Premium Processing Charge").

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The following table compares annual and monthly premiums for Insureds who are in the Non-Smoker Premium Class.  Note that in these examples the sum of 12 monthly premiums for a particular Policy is approximately 106% of the annual premium for the Policy.

	$50,000 Face Amount		$100,000 Face Amount
	Monthly	Annual	Monthly	Annual
Male, Issue Age 25	34.80	395.50	67.32	765.00
Female, Issue Age 35	44.75	508.50	87.21	991.00
Male, Issue Age 45	79.64	905.00	156.90	1,783.00
Female, Issue Age 55	108.81	1,236.50	215.16	2,445.00

Unscheduled Premiums.  The Owner may make unscheduled premium payments at any time, subject to certain minimum and maximum limitations.  The minimum unscheduled premium payment is $25.  The maximum unscheduled premium which NLIC will accept in any Policy Year, without prior approval, is a multiple of the scheduled annual Base Premium, based on the Attained Age of the Insured, as shown in the following table.

Attained Age	Multiple of Scheduled Base Premium
0-59	10
60-65	8
66-70	6
71-75	5
76-80	4
81-85	3
86+	2

The Owner may plan to pay on a regular basis a premium amount in excess of the scheduled premium.  NLIC will show this additional amount as payable on the premium notice.  However, only the required scheduled premium shown on such notice must be paid to keep the Policy in full force.

The Cash Value of the Policy will immediately increase as of the date an unscheduled premium payment is received.  This will increase the likelihood that the Special Premium Payment Provision will go into effect earlier than it otherwise would.  If unscheduled premium payments are made, the Special Premium Payment Provision may go into effect slightly later for a Policy with the Increasing Death Benefit than it would for the same Policy with the Basic Death Benefit.  Of course, the Cash Value may subsequently increase or decrease depending upon the investment experience of the Subaccounts to which the net unscheduled premium is allocated.  Depending upon the circumstances, the Death Benefit may or may not increase when an unscheduled premium payment is received.  If the Special Premium Payment Provision has been in effect and scheduled premiums have been skipped, then payment of unscheduled premiums increases the total premiums paid and therefore can increase the amount of the Surrender Charge.

Premium Change Date.  Each Policy sets forth a scheduled premium amount payable on the Policy Date and on each subsequent premium due date until the Premium Change Date.  Each Policy also sets forth a higher premium amount payable on and after the Premium Change Date.  The Premium Change Date is the Policy Anniversary nearest the Insured's Attained Age 70 or the 15th Policy Year, if later.  Because of the premium change feature, the scheduled premiums payable before the Premium Change Date are lower than would otherwise be available and NLIC is able to provide a Guaranteed Minimum Death Benefit, as long as scheduled premiums are paid when due.

The higher premium amount specified in the Policy which is payable beginning on the Premium Change Date is based on the following assumptions:

1. no unscheduled premium payments are made;

2. maximum Cost of Insurance Charges are deducted in all Policy Years; and

3. the net rate of return for the chosen Subaccount is 4½%.

Two months prior to the Premium Change Date, NLIC will recompute the scheduled premium amount payable on and after such date, assuming all scheduled premiums due before the Premium Change Date are paid.  If the Owner has made unscheduled premium payments, if the Cost of Insurance Charges deducted are less than the maximum charges, if the chosen Subaccount has a net rate of return greater than 4½%, or if any appropriate combination of these factors occurs, the amount of scheduled premiums payable on and after the Premium Change Date will usually be less than the premium amount payable on and after such date as shown in the Policy; in no event will the premium be greater than that shown in the Policy.  If unscheduled premium payments are made, for a Policy with the Increasing Death Benefit, the premium payable on and after the Premium Change Date may be slightly higher than it would be for the same Policy with the Basic Death Benefit.

Special Premium Payment Provision.  If the "Special Premium Payment Provision" is in effect, the Owner will not be required to pay scheduled premiums to keep the Policy in full force.  Generally, this provision will take effect when the Cash Value exceeds a particular amount as described in more detail below.

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The Special Premium Payment Provision operates on an annual basis.  NLIC will notify the Owner if this provision goes into effect and each year that it stays in effect.  To determine whether this provision will take effect for a Policy Year, NLIC will calculate whether the Cash Value on the Policy Processing Day 2 months before each Policy Anniversary, plus any scheduled but unpaid premiums due before the Policy Anniversary, exceeds an amount called the Special Premium Payment Single Premium.  This is an amount which if paid as one sum, and given certain assumptions, which are described in the following paragraph, would be sufficient to purchase a single premium life insurance policy at the Insured's Attained Age with a face amount equal to the Policy's Face Amount.  If the Cash Value exceeds this amount and if the required scheduled premiums due before the Policy Anniversary are paid, then the Special Premium Payment Provision goes into effect on that Policy Anniversary and remains in effect for one year.  The Policy will remain in force for that year, regardless of whether the Owner makes premium payments or the Cash Value remains greater than the Special Premium Payment Single Premium (the "SPPSP").  If any premium payments are paid while the Special Premium Payment Provision is in effect, they will be considered unscheduled premium payments.  Therefore, any premiums for supplemental benefits and extra-premium class will not be deducted from such premium payments.  Instead, while the Special Premium Payment Provision is in effect, a portion of the premiums for supplemental benefits and extra-premium class will be deducted from the Cash Value at the premium frequency in effect (see "Supplementary Benefit Charge").

The assumptions on which the SPPSP is based are:

1. Current cost of insurance rates;

2. Expense charges described herein;

3. A Death Benefit equal to the applicable Guaranteed Minimum Death Benefit for the Policy;

4. An amount sufficient to cover the cost of any supplementary benefits and extra-premium class; and

5. An assumed interest rate.

The assumed interest rate is 7.5% if the Special Premium Payment Provision was not in effect for the prior Policy Year, and is 9% if the provision was in effect for the prior Policy Year.  Since the 7.5% assumed interest rate results in a higher SPPSP than when the 9% assumed interest rate is used, it is possible for the provision to stay in effect when the factors affecting Cash Value are less favorable than necessary initially to trigger the provision.

Since the effectiveness of the Special Premium Payment Provision depends on the amount of Cash Value, it depends upon all the factors that affect Cash Value, such as the investment experience, the amount and frequency of unscheduled premium payments, and the level of actual cost of insurance and other charges.  Greater investment performance, payment of unscheduled premiums, and lower cost of insurance and other charges will each tend to increase the likelihood that the provision will go into effect.  The provision also depends on the relationship between the Cash Value and the SPPSP, and the SPPSP increases with the Insured's Attained Age.  Therefore, for older Insureds the Cash Value must be correspondingly higher to trigger this provision.

The time that the Special Premium Payment Provision goes into effect may also depend upon whether the Policy has the Basic or Increasing Death Benefit Option.  Assuming that unscheduled premium payments have been made, for a Policy with the Increasing Death Benefit, the Cash Value may be slightly lower and the SPPSP higher than for the same Policy with the Basic Death Benefit.  Therefore, where unscheduled premium payments have been made, the Special Premium Payment Provision may go into effect later for a Policy with the Increasing Death Benefit than it would for the same Policy with the Basic Death Benefit.

For Policies issued to residents of New York State, the determination of whether the Special Premium Payment Provision will take effect is based on whether the Cash Value exceeds the greater of the SPPSP and the Special Premium Payment Tabular Value (the SPPTV).

For a Policy with the Basic Death Benefit, the SPPTV is calculated like the Cash Value of the Policy except that it is based on the following assumptions:

1. Guaranteed (maximum) cost of insurance rates;

2. Expense charges described herein;

3. A net investment return of 4½%;

4. Payment of all scheduled premiums when due; and

5. No unscheduled premium payments or policy loans.

Because these assumptions are more conservative than the assumptions used to calculate the SPPSP, for New York Policies it is somewhat less likely, under certain circumstances, that the Special Premium Payment Provision will go into effect as early as it will for other Policies and New York Policies may require a higher net rate of return in order for the Special Premium Payment Provision to remain in effect for a subsequent year.

Automatic Premium Loan.  The Owner may elect the Automatic Premium Loan (APL) provision in the Application for the Policy or by written request after the Policy is issued.  The APL provision will be operative only when premiums are payable other than monthly.  If the APL provision is operative, any scheduled premium which has not been paid by the end of the Grace Period will be paid by a policy loan within 7 days after the end of such Grace Period, provided the Policy has sufficient loan value and the Special

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Premium Payment Provision is not in effect.  The interest rate charged under the APL provision is the same as that charged for any other Policy loan.  (See "Loan Privilege.")

Premium Limitations.  The Code provides for exclusion of the Death Benefit from a Beneficiary's gross income if total premium payments do not exceed certain stated limits.  In no event can the total of all premiums paid under a Policy exceed such limits.  NLIC has established procedures to monitor whether aggregate premiums paid under a Policy exceed those limits.  If a premium is paid which would result in total premiums exceeding such limits, NLIC will accept only that portion of the premium which would make total premiums equal the maximum amount which may be paid under the Policy.  NLIC will notify the Owner of available options with regard to the excess premium.  If a satisfactory arrangement is not made, NLIC will refund this excess to the Owner.  If total premiums do exceed the maximum premium limitations established by the Code, however, the excess of a Policy's Death Benefit over the Policy's cash surrender value (Cash Value less any applicable Surrender Charge) should still be excludable from gross income.

The maximum premium limitations set forth in the Code depend in part upon the amount of the Death Benefit at any time.  As a result, any Policy changes which affect the amount of the Death Benefit may affect whether cumulative premiums paid under the Policy exceed the maximum premium limitations.  To the extent that any such change would result in cumulative premiums exceeding the maximum premium limitations, NLIC will not effect such change.  (See "Federal Income Tax Considerations.")  NLIC reserves the right to require satisfactory Evidence of Insurability before accepting a premium payment that would increase the Net Amount at Risk.

Refund of Excess Premium for Modified Endowment Contracts.  At the time a premium is credited which would cause the Policy to become a Modified Endowment Contract ("MEC"), NLIC will notify the Owner that the Policy will become a MEC unless the Owner requests a refund of the excess premium within 30 days after receiving the notice.  If the Owner requests a refund, NLIC will deduct the Cash Value attributable to the excess premium (including any interest or earnings on the excess premium) from the Subaccounts in the same proportion as the premium was initially allocated to the Subaccounts.  The excess premium paid (including any interest or earnings on the excess premium) will be returned to the Owner.  For more information on MECs, see "Federal Income Tax Considerations."

Allocation of Net Premiums.  In the Application for the Policy, the Applicant elects to have net scheduled premiums (scheduled Base Premiums less 7½% for sales charge and state premium tax charge, see "Premium Expense Charge,") allocated to one or more Subaccounts.  No less than 5% of a Net Premium may be allocated to any chosen Subaccount.  The allocation percentages for the chosen Subaccounts must be in whole numbers.  This initial allocation will remain in effect until changed by written notification to NLIC.

The allocation percentages in effect for net scheduled premiums will also apply to net unscheduled premium payments (unscheduled premium payments less Premium Expense Charges, see "Premium Expense Charge,") unless NLIC is notified that a different allocation is to be used for that particular unscheduled premium.  NLIC must be notified with each unscheduled premium payment whether the allocation percentages for scheduled premiums will be used.  NLIC will allocate the first Net Premium to the Subaccounts on the later of the Issue Date of the Policy or the date NLIC receives the payment at its Service Center.

NLIC will allocate subsequent Net Premiums to the Subaccounts as of the date it receives the payment at its Service Center.  For premiums paid under the Automatic Payment Plan (pre-authorized check or Electronic Funds Transfer), such will be allocated to the Subaccounts on the date NLIC receives credit for the funds.

The values of the Subaccounts will vary with their investment experience and the Owner bears the entire investment risk.  Owners should periodically review their allocation schedule in light of market conditions and the Owner's overall financial objectives.

Replacement of Existing Insurance.  It may not be in an Owner's best interest to surrender, lapse, change, or borrow from existing life insurance policies or annuity contracts in connection with the purchase of the Policy.  An Owner should compare his or her existing insurance and the Policy carefully.  An Owner should replace his or her existing insurance only when he or she determines that the Policy is better for him or her.  An Owner may have to pay a surrender charge on his or her existing insurance, and the Policy will impose a new surrender charge period.  An Owner should talk to his or her financial professional or tax adviser to make sure the exchange will be tax-free.  If an Owner surrenders his or her existing policy for cash and then buys the Policy, the Owner may have to pay a tax, including possibly a penalty tax, on the surrender.  Because NLIC will not issue the Policy until NLIC has received an initial premium from the existing insurance company, the issuance of the Policy may be delayed.

Disruptive Trading

Neither the Policies nor the Portfolios are designed to support active trading strategies that require frequent movement between or among Subaccounts (sometimes referred to as "market-timing," "short-term trading," or "disruptive trading").  We discourage (and will take action to deter) disruptive trading in the Policies because the frequent movement between or among Subaccounts may negatively impact other Policy Owners.  Short-term trading can result in:

· the dilution of the value of Policy Owners' interests in the Portfolio;

· Portfolio managers taking actions that negatively impact performance (keeping a larger portion of the Portfolio's assets in cash or liquidating investments prematurely in order to support redemption requests); and/or

· increased administrative costs due to frequent purchases and redemptions.

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To protect Policy Owners from the negative impact of these practices, we have implemented, or we reserve the right to implement, several processes and/or restrictions aimed at eliminating the negative impact of disruptive trading strategies.  We cannot guarantee that our attempts to deter active trading strategies will be successful.  If active trading strategies are not successfully deterred by our actions, the performance of the Subaccounts that are actively traded will be adversely impacted. Policy Owners remaining in the affected Subaccount will bear any resulting increased costs.

Redemption Fees.  Some Portfolios assess a short-term trading fee in connection with transfers from a Subaccount that occur within 60 days after the date of the allocation to that Subaccount.  The fee is assessed against the amount transferred and is paid to the Portfolio.  Redemption fees compensate the Portfolio for any negative impact on fund performance resulting from short-term trading.  For more information on Short-Term Trading Fees, please see the "Short-Term Trading Fees" provision.

U.S. Mail Restrictions.  We monitor transfer activity in order to identify those who may be engaged in disruptive trading practices.  Transaction reports are produced and examined.  Generally, a Policy may appear on these reports if the Policy Owner (or a third party acting on their behalf) engages in a certain number of transfers in a given period.  We consider each telephone, fax, e-mail, or Written Request to be a single transfer, regardless of the number of Subaccounts involved.

As a result of this monitoring process, we may restrict the method of communication by which transfer orders will be accepted.  In general, we will adhere to the following guidelines:

Trading Behavior	Our Response
6 or more transfers in one calendar quarter	We will mail a letter to the Policy Owner notifying them that: (1) they have been identified as engaging in harmful trading practices; and (2) if their transfers exceed 11 in 2 consecutive calendar quarters or 20 in one calendar year, the Policy Owner will be limited to submitting transfer requests via U.S. mail.
More than 11 transfers in 2 consecutive calendar quarters OR More than 20 transfers in one calendar year	We will automatically limit the Policy Owner to submitting transfer requests via U.S. mail.

Each January 1st, We will start the monitoring anew, so that each Policy starts with 0 transfers each January 1.  See, however, the "Other Restrictions" provision below.

Managers of Multiple Policies.  Some investment advisers/representatives manage the assets of multiple NLIC policies and/or contracts pursuant to trading authority granted or conveyed by multiple Policy Owners.  We will generally require these multi-contract advisers to submit all transfer requests via U.S. mail.

Other Restrictions.  We reserve the right to refuse or limit transfer requests, or take any other action deemed necessary, in order to protect Policy Owners, Payees, and Beneficiaries from the negative investment results that may result from short-term trading or other harmful investment practices employed by some Policy Owners (or third parties acting on their behalf).  In particular, trading strategies designed to avoid or take advantage of our monitoring procedures (and other measures aimed at curbing harmful trading practices) that are nevertheless determined by us to constitute harmful trading practices, may be restricted. In the event a restriction we impose results in a transfer request being rejected, we will notify you that your transfer request has been rejected.  If a short-term trading fee is assessed on your transfer, we will provide you a confirmation of the amount of the fee assessed.  Any restrictions that we implement will be applied consistently and uniformly.  Some transfers do not count as transfers for purposes of monitoring for disruptive trading (see below).

Portfolio Restrictions and Prohibitions. Pursuant to regulations adopted by the SEC, we are required to enter into written agreements with the Portfolios which allow them to:

(1) request the taxpayer identification number, international taxpayer identification number, or other government issued identifier of any of our policy owners;

(2) request the amounts and dates of any purchase, redemption, transfer or exchange request ("transaction information"); and

(3) instruct us to restrict or prohibit further purchases or exchanges by policy owners that violate policies established by the Portfolio (whose policies may be more restrictive than our policies).

We are required to provide such transaction information to the Portfolios upon their request.  In addition, we are required to restrict or prohibit further purchases or exchange requests upon instruction from the Portfolios.  We and any affected policy owner may not have advance notice of such instructions from a Portfolio to restrict or prohibit further purchases or exchange requests.  If a Portfolio refuses to accept a purchase or exchange request submitted by us, we will keep any affected policy owner in their current Portfolio allocation.

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Transfers of Cash Value

Transfers.  The Owner may transfer the Cash Value between and among the Subaccounts by making a transfer request to NLIC.  The amount transferred must be at least $100, unless the total value in an Subaccount is less than $100, in which case the entire amount may be transferred.  The transfer will be effective as of the date of receipt of the transfer request at NLIC's Service Center.  We deduct a $25 charge from the amount transferred for the 5th and each additional transfer in a Policy Year.  We may restrict the quantity and/or mode of communication of transfer requests to prohibit disruptive trading that is deemed potentially harmful to Policy Owners.

Transfer Right for Change in Investment Policy of a Subaccount.  If the investment policy of a Subaccount is materially changed, the Owner may transfer the portion of the Cash Value in such Subaccount to another Subaccount without having such transfer count toward the 4 transfers permitted each Policy Year free of charge.  However, any such transfer will count as a transfer for purposes of monitoring for disruptive trading.

Automatic Asset Rebalancing.  Automatic asset rebalancing is a feature which, if elected, authorizes periodic transfers of policy values among Subaccounts in order to maintain the allocation of such values in percentages that match the then current premium allocation percentages.  Election of this feature may occur at the time of application or at any time after the Policy is issued by properly completing the election form and returning it to NLIC.  The election may be revoked at any time.  Rebalancing may be done annually.  Rebalancing will end when the total value in the Subaccounts is less than $1,000, a transfer is made, or there is a change to the current premium allocation instructions.  There is no additional charge for this program.  NLIC reserves the right to suspend automatic asset rebalancing at any time, for any class of Policies, for any reason.  Automatic asset rebalancing transfers do not count as transfers for purposes of assessing the transfer fee.  However, automatic asset rebalancing transfers do count as transfers for purposes of monitoring for disruptive trading.

Policy Duration

Grace Period for Payment of Scheduled Premiums.  If a scheduled premium is not paid and the Special Premium Payment Provision is not in effect, the Policy will enter a Grace Period.  A Grace Period of 61 days from the due date is allowed for payment of scheduled premiums after the first scheduled premium.  If the Policy enters a Grace Period, NLIC will mail a notice to the Owner's last known address.  The 61-day Grace Period begins on the date of the notice.  If scheduled premiums are paid on or before their due dates or within the Grace Period, the Policy will remain in full force even if the investment experience of the Subaccounts designated by the Owner has been so unfavorable that there is no Cash Value.  When the Special Premium Payment Provision is not in effect and the Automatic Premium Loan provision is not operative, the failure to pay a scheduled premium by the expiration of the Grace Period will cause the Policy to lapse as of the date the unpaid premium was due.  If the Policy lapses, the Owner can surrender the Policy for its Net Cash Surrender Value as of the date of lapse if this is a Valuation Day (otherwise on the Valuation Day next following the date of lapse), apply for reinstatement or continue the insurance as Extended Term Insurance or Reduced Paid Up Insurance.  If the Insured dies during the Grace Period, NLIC will pay the Proceeds.

Reinstatement.  The Policy may be reinstated within three years from the date the unpaid premium was due if it was not surrendered and the Owner provides Evidence of Insurability.  Payment of a premium will be required equal to the greater of:

(a) all unpaid scheduled premiums with interest at 6% per year compounded annually, plus any policy loan and accrued interest as of the end of the Grace Period; or

(b) 110% of the increase in the cash surrender value (Cash Value less any applicable Surrender Charge) resulting from reinstatement plus all overdue premiums for supplementary insurance benefits with interest at 6% compounded annually.

Upon reinstatement the Policy will have the same Cash Value and Death Benefit as if it had not lapsed.  The date of reinstatement will be the date NLIC approves the application for reinstatement.

Options on Lapse

Extended Term Insurance (ETI).  The Net Cash Surrender Value as of the date this Option is applied, plus Monthly Deductions made on any Policy Processing Day on or after the date of lapse, will be used as a single premium to buy fixed-benefit Extended Term Insurance for the Insured.  The amount of insurance will equal the Death Benefit on the date of lapse minus any loan and accrued interest as of that date.  The term period will be that which the single premium will provide for the Insured's Attained Age and sex.  ETI has a Cash Value but no loan value.  ETI will not be available if the Premium Class is Non-Smoker with Extra-Premium or Extra-Premium or the amount of paid up insurance would be greater than the amount of the ETI.

Reduced Paid Up Insurance (RPU).  The Net Cash Surrender Value as of the date the Option is applied, plus Monthly Deductions made on any Policy Processing Day on or after the date of lapse, will be used as a single premium to buy that amount of fixed-benefit insurance which will continue for the Insured's lifetime based on the Insured's Attained Age and sex.  Reduced Paid Up Insurance has a loan privilege the same as that available for premium paying policies.

NLIC will apply ETI automatically unless it is not available or the Owner selects another option.  If ETI is not available, RPU will be automatic.  A selected option will be applied on the date NLIC receives written request at its home office; NLIC will apply an automatic option three months after the date of lapse.  The option will be effective as of the date of lapse.

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Exchange Privilege

Within 6 months after the effective date of a material change in the investment policy of any chosen Subaccount, the Owner may exchange the Policy for a fixed-benefit whole life insurance policy offered by NLIC on the life of the Insured.

No Evidence of Insurability is required to exercise this privilege.  The new policy will have a face amount equal to the Face Amount of the Policy and the same Issue Age, issue date and Premium Class for the Insured as the Policy.  Premiums for the new policy will be based on the rates which were in effect for the new policy on the Policy Date for the Policy.

The exchange will be subject to an equitable adjustment to reflect variances, if any, in the Cash Values and dividends of the Policy and the new policy.  The method of calculating the adjustment is filed by NLIC with the appropriate state insurance regulatory authorities.  Any policy loan and loan interest must be repaid on or before the effective date of the exchange.

Loan Privilege

The Owner may borrow from NLIC using the Policy as sole security for the loan.  The Owner may borrow up to the difference between the Policy's current Loan Value and any outstanding policy loan and accrued interest.  The minimum amount of any policy loan is $300 ($200 for Policies issued to residents of Connecticut), unless used to pay a scheduled premium.  During Policy Years 1 through 3, the loan value of the Policy will be 75% of the cash surrender value (Cash Value less any applicable Surrender Charge); during Policy Year 4 and thereafter it will be 90% of the cash surrender value (90% in all years for Policies issued to residents of Virginia).

If on a Policy Anniversary the outstanding policy loan and accrued interest exceeds the cash surrender value, the Policy will terminate 31 days after NLIC mails notice to the Owner and any assignee of record at their last known addresses, unless a payment of the amount of such excess is made within that period.  In no event will the required payment exceed the amount of the accrued loan interest plus all due and unpaid scheduled premiums.

While the Insured is living, the Owner may repay all or a portion of a loan and accrued interest.  The amount of any outstanding policy loan and accrued interest will be deducted in determining the Net Cash Surrender Value or Proceeds at death.

Interest Rate.  The interest rate charged on policy loans will be either a fixed annual rate of 8% or a variable loan interest rate.  The Owner must select one of these rates in the Application for the Policy.  If the fixed rate is selected, the Owner may later change to the variable rate.  Such change will be effective as of the Policy Anniversary following receipt of written notice by NLIC at its Service Center.  The Owner is not permitted to change from the variable rate to the fixed rate.

Interest is due at the end of each Policy Year on the Policy Anniversary.  If not paid when due, the interest will be added to the loan and bear interest, beginning 23 days after the Policy Anniversary, at the applicable policy loan interest rate.

Variable Loan Interest Rate.  The variable loan interest rate will be determined by NLIC to be effective as of the first day of each January, April, July and October, unless the state in which this Policy is delivered requires the determination to be made less frequently, such as yearly.  The maximum interest rate will be the greater of 5½% or the Moody's Corporate Bond Yield Average-Monthly Average Corporates as published by Moody's Investors Service, Inc. (if this average is no longer published, a maximum rate set by state law or by the insurance supervisory official of the state in which the Policy is delivered will apply), for the calendar month ending two months prior to the date of change.  If the maximum interest rate for the new period is at least ½% lower than the loan interest rate currently being charged, the rate for the new period will be decreased such that it is equal to or less than the maximum interest rate allowed for such period.  If the maximum interest rate for the new period is at least ½% higher than the loan interest rate currently being charged, NLIC may, at its discretion, increase the rate for the new period to a rate that is no higher than the maximum interest rate allowed for such period.  Any decrease in the variable loan rate is required; any increase in the rate is optional.  NLIC will not necessarily charge the maximum variable loan interest rate.

Allocation of Loans and Repayments.  When a loan is made, a portion of the Cash Value equal to the amount of the loan is transferred from the Subaccounts to NLIC's General Account.  Repayment of a loan will result in a transfer back to the Subaccounts.  A loan and any repayment will be allocated among the Subaccounts based upon the net Cash Value of each Subaccount as of the date the loan or the repayment is made.

Effect of Loan.  A loan taken from, or secured by, a Policy may, in certain circumstances, have adverse federal income tax consequences (see "Federal Income Tax Considerations").  A loan, whether or not repaid, affects the Policy, the Cash Value, the Net Cash Surrender Value, and the Death Benefit.  Loan amounts are not affected by the investment performance of the Subaccounts.

Interest Rate Credited.  The amount maintained in the General Account will not reflect the investment experience of the Subaccounts during the period the loan is outstanding.  Instead, interest will be credited on each Policy Processing Day on the loaned amount at an annual rate 1.50% below the 8% or variable interest rate charged on the policy loan.

Lapse with Loans Outstanding.  The amount of an outstanding loan under a Policy plus any accrued interest on outstanding loans is not part of Net Cash Surrender Value.  Therefore, the larger the amount of an outstanding loan, the more likely it is that the Policy could lapse.  In addition, if the Policy is not a Modified Endowment Policy, lapse of the Policy with outstanding loans may result in adverse tax consequences.  (See "Tax Treatment of Policy Benefits.")

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Withdrawal of Excess Cash Value

The Owner may withdraw excess Cash Value from the Policy if two conditions are met.  First, a cash withdrawal may be made only to the extent that the cash surrender value (the Cash Value minus any applicable surrender charge) is at least $300 more than an amount called the "Withdrawal Single Premium," which depends on the Insured's Attained Age.  Second, a cash withdrawal may be made only if the amount withdrawn does not reduce the Policy's net loan value (Loan Value less existing policy loan and accrued interest) to zero.  (See "Loan Privilege.")  Upon request, NLIC will tell the Owner how much may be withdrawn.

NLIC will process each withdrawal on the date it receives the Owner's request if this is a Valuation Day, otherwise on the Valuation Day next following NLIC's receipt of the request.  NLIC generally will pay a withdrawal request within seven days after the Valuation Day when NLIC receives the request.  NLIC may postpone payment of withdrawals under certain conditions.

No more than four withdrawals may be made in a Policy Year.  A withdrawal cannot be made for less than $300.  Withdrawals cannot be repaid except as premium payments, subject to Premium Expense Charges (see "Premium Expense Charge") and any applicable limits on premium payments (see "Payment and Allocation of Premiums").  If the Owner does not specify an allocation for the withdrawal, it will be allocated among the Subaccounts based upon the net Cash Value of each Subaccount on the date of the withdrawal.

Calculation of Withdrawal Single Premium.  The Withdrawal Single Premium is based on:

(1) Current cost of insurance rates;

(2) Expense charges described herein;

(3) A Death Benefit equal to the applicable Guaranteed Minimum Death Benefit for the Policy;

(4) An interest rate of 7½%; and

(5) An amount sufficient to cover the cost of additional premiums for supplementary benefits and extra-premium class.

The Withdrawal Single Premium is the same as the Special Premium Payment Single Premium ("SPPSP") using the 7.5% assumed rate (examples of the 7½% SPPSP are listed in Examples A and B), which is used to calculate whether the Special Premium Payment Provision goes into effect.  Generally a withdrawal of excess cash cannot be made unless the Special Premium Payment Provision is in effect.  There may be limited situations, however, where a cash withdrawal can be made although the Special Premium Payment Provision is not in effect, because the cash surrender value (Cash Value less any applicable Surrender Charge) may have increased since the SPPSP was last calculated.  In addition, the Special Premium Payment Provision may be in effect during periods when cash withdrawals may not be made, for several reasons including: (1) the withdrawal provision depends on whether the cash surrender value exceeds the Withdrawal Single Premium, whereas the Special Premium Payment Provision depends on whether a larger amount, the Cash Value, exceeds the SPPSP; (2) the withdrawal provision is based on the 7.5% SPPSP, whereas a smaller amount, the 9% SPPSP, is used to determine if the Special Premium Payment Provision will remain in effect for another year once it is in effect; and (3) since the minimum cash withdrawal is $300, cash withdrawals are permitted only if the cash surrender value is at least $300 greater than the Withdrawal Single Premium.

For Policies issued to residents of New York State, the amount that may be withdrawn is based on whether the cash surrender value is at least $300 more than the greater of the Withdrawal Single Premium and the Withdrawal Tabular Value.

For a Policy with the Basic Death Benefit, the Withdrawal Tabular Value is calculated like the Cash Value of the Policy except that it is based on the following assumptions:

(1) Guaranteed (maximum) cost of insurance rates;

(2) Expense charges described herein;

(3) A net investment return of 4½%;

(4) Payment of all scheduled premiums when due; and

(5) No unscheduled premium payments or policy loans.

Because these assumptions are more conservative than the calculations used to calculate the Withdrawal Single Premium, for New York Policies, it is somewhat less likely under certain circumstances that there can be a withdrawal of excess Cash Value.

Effect of Withdrawal.  Whenever a withdrawal is made, the Death Benefit will immediately be recalculated to take into account the reduction in Cash Value.  This will not change the Guaranteed Minimum Death Benefit or the amount of scheduled premiums payable before the Premium Change Date.  The amount of scheduled premiums after the Premium Change Date may be affected by withdrawals but in no event will they be greater than the amount set forth in the Policy.  A withdrawal may, under certain circumstances, have adverse federal income tax consequences.  (See "Tax Treatment of Policy Benefits.")

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Surrender Privilege

The Policy may be surrendered at any time while the Insured is living for its Net Cash Surrender Value.  The Net Cash Surrender Value is the Cash Value minus any policy loan and accrued interest less any Surrender Charge.  NLIC will assess a Surrender Charge if the Policy is surrendered before the 9th Policy Year.  (See "Surrender Charge.")  NLIC will determine the Net Cash Surrender Value on the date it receives at its Service Center a surrender request signed by the Owner if this is a Valuation Day, otherwise on the Valuation Day next following NLIC's receipt of the surrender request.  All coverage and benefits under the Policy will end on the day the Owner mails or otherwise sends the surrender request to NLIC and the Policy cannot be reinstated.  NLIC generally will pay the Net Cash Surrender Value to the Owner in a lump sum within seven days after it receives the Owner's completed, signed surrender request.  NLIC may postpone payment of surrenders under certain conditions.  Surrendering the Policy may have adverse federal income tax consequences.  (See "Federal Income Tax Considerations.")

CHARGES AND DEDUCTIONS

Charges will be deducted in connection with the Policy to compensate NLIC for (a) providing the insurance benefits set forth in the Policy; (b) administering the Policy; (c) assuming certain risks in connection with the Policy; and (d) incurring expenses in distributing the Policy.  In the event that there are any profits from fees and charges deducted under the Policy, including but not limited to mortality and expense risk charges, such profits could be used to finance the distribution of contracts.

Premium Expense Charge

Prior to allocation of Net Premiums, premiums paid are reduced by a Premium Expense Charge which consists of:

Premium Tax Charge.  Various states and some of their subdivisions impose a tax on premiums received by insurance companies.  A charge is deducted from each premium payment to compensate NLIC for paying state premium taxes.  This charge is equal to 2.50% of each scheduled Base Premium or unscheduled premium remaining after the premium processing charge has been deducted.  Premium taxes vary from state to state and the 2.50% is the average rate expected to be paid on premiums received in most states.  This charge may be increased in certain localities when substantial additional premium taxes are assessed.

Sales Charge.  A charge of 5% of each scheduled Base Premium or unscheduled premium remaining after the premium processing charge has been deducted.  This charge is deducted from each premium payment to partially compensate NLIC for the cost of selling the Policy (There also is a Contingent Deferred Sales Charge which is deducted only if the Policy is surrendered or lapses in the first 9 Policy Years.  See "Contingent Deferred Sales Charge.")

Premium Processing Charge.  NLIC will deduct a charge of $1.00 from each premium payment to cover the cost of collecting and processing premium payments.  Policies for which premiums are paid annually will therefore incur lower aggregate premium processing charges than Policies with premiums paid more frequently.

The Premium Tax Charge and Sales Charge are a percentage of each scheduled Base Premium and unscheduled premium.  This means that the greater the amount and frequency of premium payments the Owner makes, the greater the amount of these charges NLIC will assess.

Surrender Charges

A Surrender Charge, which consists of a Contingent Deferred Administrative Charge and a Contingent Deferred Sales Charge, is imposed if the Policy is surrendered or lapses at any time before the end of the 9th Policy Year.  The Surrender Charge is deducted from the Subaccounts based on the proportion that the Owners' value in the Subaccounts bears to the total unloaned Cash Value of the Policy.

These Surrender Charges are designed partially to compensate NLIC for the cost of administering, issuing and selling the Policy, including agent sales commissions, the cost of printing the prospectuses and sales literature, any advertising costs, medical exams, review of Applications for insurance, processing of the Applications, establishing policy records and Policy issue.  NLIC does not expect the Surrender Charges to cover all of these costs.  To the extent that they do not, NLIC will cover the short-fall from its General Account assets, which may include profits from the Mortality and Expense Risk Charge and Cost of Insurance Charge.

Contingent Deferred Administrative Charge.  The Contingent Deferred Administrative Charge is as follows:

Policy Year	Charge per $1,000 Face Amount
1-5	$5.00
6	4.00
7	3.00
8	2.00
9	1.00
10	0

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Contingent Deferred Sales Charge.  The Contingent Deferred Sales Charge is to partially compensate NLIC for the cost of selling the Policy.

If the Special Premium Payment Provision has never been in effect as of the date of surrender or lapse, then the Contingent Deferred Sales Charge is a percentage of the lesser of:

(i) the total premiums paid, less premium processing charges, to the date of surrender or lapse; and

(ii) the scheduled Base Premiums payable up to such date (scheduled Base Premiums are total scheduled premiums less premium processing charges and premiums for supplementary benefits and for extra-premium class);

If the Special Premium Payment Provision has been in effect prior to the date of surrender or lapse, then the Contingent Deferred Sales Charge is a percentage of the lesser of:

(i) the total premiums paid, less premium processing charges, to the date of surrender or lapse; and

(ii) the scheduled Base Premium that would have been payable up to such date if the Special Premium Payment Provision had never been in effect.

The maximum Contingent Deferred Sales Charge is an amount equal to 25% of the first year's scheduled Base Premium, plus 5% of the scheduled Base Premiums for Policy Years 2, 3, 4 and 5.  Expressed differently, this equals 9% of the total scheduled Base Premiums for Policy Years 1 through 5.  The maximum Contingent Deferred Sales Charge will be applied to Policies that lapse or are surrendered during Policy Year 5.  Thereafter, the Contingent Deferred Sales Charge will be reduced each year until it becomes zero in Policy Years 10 and thereafter.

The following table shows the rates that will apply when Policies with premiums payable annually (and for Insureds with an Issue Age of 65 or less) are surrendered or lapse.

For Policies Which Are Surrendered or Lapse During Policy Year	The Contingent Deferred Sales Charge Rates Will Be The Following Percentage of One Scheduled Annual Premium	Which is Equal to the Following Percentage of the Scheduled Premiums Up to the Date of Surrender or Lapse
1	25%	25.00%
2	30%	15.00%
3	35%	11.66%
4	40%	10.00%
5	45%	9.00%
6	40%	6.66%
7	30%	4.28%
8	20%	2.50%
9	10%	1.11%
10 and later	Zero	Zero

For Insureds whose Issue Age is above 65, the rates that will apply when Policies with premiums payable annually are surrendered or lapse will be less than or equal to those shown in the table above.

For Policies with premiums payable more frequently than annually, the maximum Contingent Deferred Sales Charge is also 25% of the first year's scheduled Base Premiums due on or before the date of surrender or lapse plus 5% of the scheduled Base Premiums for Policy Years 2, 3, 4 and 5 which are payable on or before the date of surrender or lapse (or the same percentages of total premiums paid, if less).  The charge declines uniformly in Policy Years 6 through 9 until it becomes zero for Policy Years 10 and thereafter.  Although the rate of the Contingent Deferred Sales Charges is the same for annual premium Policies and Policies with premiums paid more frequently than annually, for Policies surrendered at the end of a Policy Year, the dollar amount of this charge will be higher for Policies with premiums paid more frequently than for annual premium Policies because the total amount of the scheduled premiums is higher.

We will waive the surrender charge of your policy if you elect to surrender it in exchange for a plan of permanent fixed life insurance offered by us subject to the following:

· the exchange and waiver may be subject to your providing us new evidence of insurability and our underwriting approval; and

·      you have not elected the Disability Waiver of Premium Rider,

We may impose a new surrender charge on the policy received in the exchange.

Monthly Deductions

Charges will be deducted from the Policy's Cash Value on the Policy Date and on each Policy Processing Day to compensate NLIC for administrative expenses and for the insurance coverage provided by the Policy.  The Monthly Deduction consists of five components – (a) the Cost of Insurance Charge, (b) Administration Charge, (c) Minimum Death Benefit Guarantee Charge, (d) First

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Year Policy Charge, and (e) Supplementary Benefit Charge.  Because portions of the Monthly Deduction, such as the Cost of Insurance Charge, can vary from month to month, the Monthly Deduction may vary in amount from month to month.  The Monthly Deduction is deducted from the Subaccounts based on the proportion that the Owner's value in the Subaccounts bears to the total unloaned Cash Value of the Policy.

Cost of Insurance.  Because the cost of insurance depends upon several variables, the cost for each Policy Month can vary.  NLIC will determine the monthly Cost of Insurance Charge by multiplying the applicable cost of insurance rate or rates by the Net Amount at Risk for each policy month.  If any unscheduled premium payments are made, this charge may be slightly higher for a Policy with the Increasing Death Benefit than for the same Policy with the Basic Death Benefit.

The Net Amount at Risk on any Policy Processing Day is the amount by which the Death Benefit exceeds the Policy's Cash Value.  The Net Amount at Risk is affected by investment performance, loans, payments of premiums, Policy fees and charges, the Death Benefit option chosen, and withdrawal of excess Cash Value.  In calculating the Cost of Insurance Charge, the rate for the Premium Class on the Policy Processing Day is applied to the Net Amount at Risk.

Any change in the Net Amount at Risk will affect the total Cost of Insurance Charges paid by the Owner.  NLIC expects to profit from Cost of Insurance Charges and may use these profits for any lawful purpose including covering distribution expenses.

Cost of Insurance Rate.  The cost of insurance rate is based on the Attained Age, Sex, and Premium Class of the Insured.  The actual monthly cost of insurance rates will be based on NLIC's expectations as to future mortality and expense experience.  They will not, however, be greater than the guaranteed maximum cost of insurance rates set forth in the Policy.  The guaranteed maximum rates are based on the Insured's Attained Age, Sex, Premium Class, and the 1980 Commissioners Standard Ordinary Smoker and Nonsmoker Mortality Table.  For Policies issued in states which require "unisex" policies (currently Montana) or in conjunction with employee benefit plans, the maximum Cost of Insurance Charge depends only on the Insured's Age, Premium Class and the 1980 Commissioners Standard Ordinary Mortality Table NB and SB.  Any change in the cost of insurance rates will apply to all persons of the same Attained Age, Sex, and Premium Class.

Premium Class.  The Premium Class of the Insured will affect the cost of insurance rates.  NLIC uses an industry-standard method of underwriting in determining Premium Classes, which are based on the health of the Insured.  NLIC currently places Insureds into one of two standard classes – smoker and nonsmoker – or into classes with extra ratings, which reflect higher mortality risks and higher cost of insurance rates.

Administration Charge.  A monthly Administration Charge of $3.25 and $0.015 per $1,000 of Face Amount is deducted from the Cash Value on the Policy Date and each Policy Processing Day as part of the Monthly Deduction.  This charge is intended to reimburse NLIC for ordinary administrative expenses expected to be incurred, including record keeping, processing claims and certain Policy changes, preparing and mailing reports, and overhead costs.

Minimum Death Benefit Guarantee Charge.  This charge compensates NLIC for the risk it assumes by guaranteeing that, no matter how unfavorable investment experience may be, as long as required scheduled premiums are paid when due the Death Benefit will never be less than the Face Amount of the Policy if the Basic Death Benefit applies and the Face Amount of the Policy plus the sum of unscheduled premiums received by NLIC as of the date of death if the Increasing Death Benefit applies.  This charge is equal to $0.01 per $1,000 of the applicable Guaranteed Minimum Death Benefit.  For a Policy with a Guaranteed Minimum Death Benefit of $50,000, the deduction will be $0.50 per month or $6.00 per year.

First Year Policy Charge.  A charge of $5.00 will be deducted on each of the first 12 Policy Processing Days.  This charge in conjunction with the Contingent Deferred Administrative Charge compensates NLIC for expenses, other than sales expenses, incurred in conjunction with issuance of the Policy.

Supplementary Benefit Charge.  If the Special Premium Payment Provision is in effect, charges for any supplementary benefits or for extra-premium class will be deducted on each Policy Processing Day a scheduled premium otherwise would be due.  These charges will be 92.5% of the premiums otherwise payable for these benefits.

Mortality and Expense Risk Charge

A daily charge will be deducted from the value of the net assets of the Subaccounts to compensate NLIC for mortality and expense risks assumed in connection with the Policy.  This charge will be deducted at an annual rate of 0.60% (or a daily rate of 0.001644) of the average daily net assets of each Subaccount.  The mortality risk assumed by NLIC is that Insureds may live for a shorter time than projected and, therefore, greater death benefits than expected will be paid in relation to the amount of premiums received.  The expense risk assumed is that expenses incurred in issuing and administering the Policies will exceed the administrative charges provided in the Policy.

If the Mortality and Expense Risk Charge proves insufficient, NLIC will provide for all death benefits and expenses and any loss will be borne by NLIC.  Conversely, NLIC will realize a gain from this charge to the extent all money collected from this charge is not needed to provide for benefits and expenses under the Policies.

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Transfer Charge

We currently allow you to make 4 transfers among the Subaccounts each Policy Year with no additional charge.

· We deduct $25 for the 5th and each additional transfer made during a Policy Year to compensate us for the costs of processing these transfers.  We deduct the transfer charge from the amount being transferred.

· For purposes of assessing the transfer charge, we consider each telephone, fax, e-mail, or Written Request to be one transfer, regardless of the number of Subaccounts affected by the transfer.

· Transfers due to automatic asset rebalancing, loans, the exchange privilege, the special transfer right, change in Subaccount investment policy, or the initial reallocation of account values from the Money Market Subaccount do not count as transfers for the purpose of assessing this charge.

Short-Term Trading Fees

Some Portfolios may assess (or reserve the right to assess) a short-term trading fee (or "redemption fee") in connection with transfers from a Subaccount that occur within 60 days after the date of allocation to the Subaccount.

Short-Term Trading Fees are intended to compensate the Portfolio (and Policy Owners with interests allocated in the Portfolio) for the negative impact on fund performance that may result from frequent, short-term trading strategies.  Short-Term Trading Fees are not intended to affect the large majority of Policy Owners not engaged in such strategies.

Any Short-Term Trading Fee assessed by any Portfolio available in conjunction with the Policies described in this prospectus will equal 1% of the amount determined to be engaged in short-term trading.  Short-Term Trading Fees will only apply to those Subaccounts corresponding to Portfolios that charge such fees (see the Portfolio prospectus).  Any Short-Term Trading Fees paid are retained by the Portfolio and are part of the Portfolio's assets.  Policy Owners are responsible for monitoring the length of time allocations are held in any particular Subaccount.  We will not provide advance notice of the assessment of any applicable Short-Term Trading Fee.

For a complete list of the Portfolios offered under the Policy that assess (or reserve the right to assess) a Short-Term Trading Fee, please refer to the list of available Portfolios earlier in this prospectus.

If a redemption fee is assessed, the Portfolio will charge the Variable Account 1% of the amount determined to be engaged in short-term trading.  The Variable Account will then pass the Short-Term Trading Fee on to the specific Policy Owner that engaged in short-term trading by deducting an amount equal to the redemption fee from that Policy Owner's Subaccount value.  All such fees will be remitted to the Portfolio; none of the fee proceeds will be retained by us or the Variable Account.

When multiple Net Premiums (or exchanges) are made to a Subaccount that is subject to Short-Term Trading Fees, transfers will be considered to be made on a first in/first out (FIFO) basis for purposes of determining Short-Term Trading Fees.  In other words, units held the longest time will be treated as being transferred first, and units held for the shortest time will be treated as being transferred last.

Some transactions are not subject to the short-term trading fees.  Transactions that are not subject to short-term trading fees include:

· scheduled and systematic transfers, such as Dollar Cost Averaging and Automatic Asset Rebalancing;

· Policy loans or surrenders; or

· payment of the Insurance Proceeds upon the Insured's death.

New share classes of certain currently available Portfolios may be added as investment options under the Policy.  These new share classes may require the assessment of Short-Term Trading Fees.  When these new share classes are added, new Net Premiums and exchange reallocations to the Portfolios in question may be limited to the new share class.

Loan Interest Charge

Loan interest is charged in arrears on the amount of an outstanding policy loan.  Loan interest that is unpaid when due will be added to the amount of the loan on each Policy Anniversary and will bear interest at the same rate.  NLIC charges either an annual fixed interest rate of 8.00% or a variable loan interest rate on policy loans.  The maximum variable interest rate is the greater of 5.50% or the Moody's Corporate Bond Yield Average-Monthly Average Corporates as published by Moody's Investors Services, Inc.

After offsetting the interest NLIC guarantees it will credit on loaned amounts, which is equal to an annual rate of 1.50% below the 8.00% fixed interest rate or variable loan interest rate, the net cost of loans is 1.50% (annually).

Charge for Income Taxes

NLIC currently does not charge the Separate Account for its corporate federal income taxes.  However, NLIC may make such a charge in the future if there are any taxes that are attributable to that account.  Charges for other applicable taxes attributable to the account also may be made.

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Guarantee of Certain Charges

NLIC guarantees that it will not increase the charges deducted from premiums, and the charge to the Separate Account for mortality and expense risks.

Other Charges

The Separate Account purchases shares of the Funds at net asset value.  The net asset value of those shares reflect management fees and expenses already deducted from the assets of the Funds' Portfolios.  The fees and expenses for the Funds and their Portfolios are described in the prospectuses of the Funds.

OWNERSHIP AND BENEFICIARY RIGHTS

The Owner is the Insured unless a different Owner is named in the Application or thereafter changed.  While the Insured is living, the Owner is entitled to exercise any of the rights stated in the Policy or otherwise granted by NLIC.  If the Insured and Owner are not the same, and the Owner dies before the Insured, these rights will vest in the estate of the Owner, unless otherwise provided.  The principal rights of the Owner include selecting and changing the Beneficiary, changing the Owner, and assigning the Policy.  Changing the Owner or assigning the Policy may result in tax consequences.

The principal right of the Beneficiary is the right to receive the Proceeds under the Policy.

MODIFYING THE POLICY

Any modification or waiver of NLIC's rights or requirements under the Policy must be in writing and signed by NLIC's president or a vice president.  No agent may bind NLIC by making any promise not contained in the Policy.

Upon notice to the Owner, NLIC may modify the Policy:

to conform the Policy, NLIC's operations, or the Separate Account's operations to the requirements of any law (or regulation issued by a government agency) to which the Policy, NLIC, or the Separate Account is subject;

to assure continued qualification of the Policy as a life insurance contract under the federal tax laws; or

to reflect a change in the Separate Account's operation.

If NLIC modifies the Policy, NLIC will make appropriate endorsements to the Policy.  If any provision of the Policy conflicts with the laws of a jurisdiction that govern the Policy, NLIC reserves the right to amend the provision to conform with these laws.

TELEPHONE, FAX, AND E-MAIL REQUESTS

In addition to written requests, transfers, automatic asset rebalancing, loans (excluding 403(b) plans), exercise of the Special Transfer Right, and partial withdrawals (fax and e-mail only) may be made based upon instructions given by telephone, fax, and e-mail, provided the appropriate election has been made at the time of application or proper authorization is provided to NLIC.  NLIC reserves the right to suspend telephone, fax, and/or e-mail privileges at any time for any class of Policies, for any reason.

NLIC will employ reasonable procedures to confirm that instructions communicated by telephone, fax, and e-mail are genuine, and if NLIC follows such procedures, it will not be liable for any losses due to unauthorized or fraudulent instructions.  NLIC, however, may be liable for such losses if it does not follow those reasonable procedures.  The procedures NLIC will follow for telephone, fax, and e-mail transactions include requiring some form of personal identification prior to acting on instructions, providing written confirmation of the transaction, and making a tape-recording of any instructions given by telephone.

Telephone, fax, and e-mail may not always be available.  Any telephone, fax, or computer system, whether it is the Owner's, the Owner's service provider's or agent's, or NLIC's, can experience outages or slowdowns for a variety of reasons.  These outages or slowdowns may delay or prevent the processing of a request.  Although NLIC has taken precautions to help its systems handle heavy use, NLIC cannot promise complete reliability under all circumstances.  If problems arise, the request should be made by writing to the Service Center.

If the Owner is provided a personal identification number ("PIN") in order to execute electronic transactions, the Owner should protect his or her PIN, because self-service options will be available to the Owner's agent of record and to anyone who provides the Owner's PIN.  NLIC will not be able to verify that the person providing instructions by telephone, fax, or e-mail is the Owner or is authorized by the Owner.

DIVIDENDS

The Policy is participating; however, no dividends are expected to be paid on the Policy.  If dividends are ever declared, they will be paid under one of the following options:

(a) paid in cash; or

(b) applied as a scheduled or unscheduled Net Premium.

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The Owner must choose an option at the time the Application for the Policy is signed.  If no option is chosen, any dividend will be applied as a Net Premium payment.  The Owner may change the option by giving written notice to NLIC.

For Policies sold in New York State, if dividends are ever declared they will be paid under one of the options above, or left to accumulate at interest or used to buy paid-up additions, as chosen by the Owner.

SUPPLEMENTARY BENEFITS

The following riders offer other supplementary benefits.  Most are subject to various age and underwriting requirements and most must be purchased when the Policy is issued.  The cost of each rider is included in the Monthly Deduction.  (See the Fee Table for more information concerning rider expenses.)

An Owner's agent can help determine whether any of the riders are suitable.  For example, an Owner should consider a number of factors when deciding whether to purchase coverage under the base Policy only or in combination with the Guaranteed Purchase Option rider.  Even though the death benefit coverage may be the same (regardless of whether an Owner purchases coverage under the Policy only or in combination with this rider), there may be important cost differences between the Policy and the rider.  The most important factors that will affect an Owner's decision are (a) the amount of premiums an Owner pays, (b) the Cost of Insurance Charges under the Policy and under the rider, (c) the investment performance of the Subaccounts in which an Owner allocates premiums, (d) an Owner's level of risk tolerance, and (e) the length of time an Owner plans to hold the Policy.  Owners should carefully evaluate all of these factors and discuss all of these options with their agents.  For more information on electing a rider, contact the Service Center for a free copy of the SAI, and for personalized illustrations that show different combinations of the Policy with various riders.  These riders may not be available in all states.  Please contact the Service Center for further details.

NLIC currently offers the following riders under the Policy:

Disability Waiver of Premium;

Accelerated Death Benefit;

Accidental Death Benefit; and

Guaranteed Purchase Option.

FEDERAL INCOME TAX CONSIDERATIONS

Introduction

The following summarizes some of the basic federal income tax considerations associated with a policy and does not purport to be complete or to cover all situations.   This discussion is not intended as tax advice.  Please consult counsel or other qualified tax advisers for more complete information .  We base this discussion on our understanding of the present federal income tax laws as they are currently interpreted by the Internal Revenue Service (the " IRS " ).  Federal income tax laws and the current interpretations by the IRS may change.

Tax Status of the Policy .  A policy must satisfy certain requirements set forth in the Internal Revenue Code ( " Code " ) in order to qualify as a life insurance policy for federal income tax purposes and to receive the tax treatment normally accorded life insurance policies.  The manner in which these requirements are to be applied to certain features of the policy are not directly addressed by the Code, and there is limited guidance as to how these requirements are to be applied.  We anticipate that a policy should satisfy the applicable Code requirements.  Because of the absence of pertinent interpretations of the Code requirements, there is, however, some uncertainty about the application of these requirements to the policy, particularly if you pay the full amount of Premiums permitted under the policy.  In addition, if you elect the Accelerated Death Benefit Rider, the tax qualification consequences associated with continuing the policy after a distribution is made are unclear.   Please consult a tax adviser on these consequences .  If it is subsequently determined that a policy does not satisfy the applicable requirements, we may take appropriate steps to bring the policy into compliance with these requirements and we reserve the right to restrict policy transactions in order to do so.

In certain circumstances, owners of variable life insurance policies have been considered for federal income tax purposes to be the owners of the assets of the separate account supporting their policies due to their ability to exercise investment control over those assets.  Where this is the case, the policy owners have been currently taxed on gains attributable to the separate account assets.  There is little guidance in this area, and some features of the Policies, such as the flexibility to allocate premiums and policy account values, have not been explicitly addressed in published rulings.  While we believe that the policy does not give you investment control over Separate Account assets, we reserve the right to modify the policy as necessary to prevent you from being treated as the owner of the Separate Account assets supporting the policy.

In addition, the Code requires that the investments of the Separate Account be " adequately diversified " in order to treat the policy as a life insurance policy for federal income tax purposes.  We intend that the Separate Account, through the portfolios, will satisfy these diversification requirements.

The following discussion assumes that the policy will qualify as a life insurance policy for federal income tax purposes.

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Tax Treatment of Policy Benefits

In General .  The death benefit under a policy should be excludible from the Beneficiary ' s gross income.  Federal, state, and local transfer, and other tax consequences of ownership or receipt of policy proceeds depend on your circumstances and the Beneficiary ' s circumstances.   You should consult a tax adviser on these consequences.

Generally, you will not be deemed to be in receipt of the policy account value until there is a distribution.  When distributions from a policy occur, or when loans are taken out from or secured by a Policy (e.g., by assignment), the tax consequences depend on whether the policy is classified as a modified endowment contract ( " MEC " ).

Modified Endowment Contracts .  Under the Code, certain life insurance policies are classified as MECs, which have less favorable income tax treatment than other life insurance policies.  Due to the policy ' s flexibility as to Premiums and benefits, each Policy ' s individual circumstances will determine whether the policy is classified as a MEC.  In general, a policy will be classified as a MEC if the amount of premiums paid into the policy causes the policy to fail the " 7-pay test. "   A policy will fail the 7-pay test if at any time in the first seven Policy Years, the amount paid into the policy exceeds the sum of the level premiums that would have been paid at that point under a policy that provided for paid-up future benefits after the payment of seven level annual payments.

If there is a reduction in the benefits under the policy during the first seven Policy Years, for example, as a result of a partial withdrawal, the 7-pay test will have to be reapplied as if the policy had originally been issued at the reduced Face Amount.  If there is a " material change " in the policy ' s benefits or other terms, the policy may have to be retested as if it were a newly issued policy.  A material change may occur, for example, when there is an increase in the death benefit that is due to the payment of an unnecessary premium.  Unnecessary premiums are premiums paid into the policy which are not needed in order to provide a death benefit equal to the lowest death benefit that was payable in the first seven Policy Years.  To prevent your policy from becoming a MEC, it may be necessary to limit premiums or to limit reductions in benefits.  A current or prospective Owner should consult a tax adviser to determine whether a policy transaction will cause the policy to be classified as a MEC.

Distributions from Modified Endowment Contracts .  Policies classified as MECs are subject to the following tax rules:

· All distributions other than death benefits from a MEC, including distributions upon surrender and partial withdrawals, will be treated as ordinary income subject to tax up to an amount equal to the excess (if any) of the unloaned policy account Value immediately before the distribution plus prior distributions over the Owner ' s total investment in the policy at that time.  They will be treated as tax-free recovery of the Owner ' s investment in the policy only after all such excess has been distributed.   " Total investment in the policy " means the aggregate amount of any premiums or other considerations paid for a policy, plus any previously taxed distributions.

· Loans taken from such a policy (or secured by such a policy, e.g., by pledge or assignment) are treated as distributions and taxed accordingly.

· A 10% additional income tax penalty is imposed on the amount includible in income except where the distribution or loan is made after you have attained age 59½ or are disabled, or where the distribution is part of a series of substantially equal periodic payments for your life (or life expectancy) or the joint lives (or joint life expectancies) of you and the Beneficiary.

If a policy becomes a MEC, distributions that occur during the Policy Year will be taxed as distributions from a MEC.  In addition, distributions from a policy within 2 years before it becomes a MEC will be taxed in this manner.  This means that a distribution from a policy that is not a MEC at the time when the distribution is made could later become taxable as a distribution from a MEC.

Distributions from Policies that are not Modified Endowment Contracts.   Distributions other than death benefits from a policy that is not a MEC are generally treated first as a recovery of your investment in the policy, and then as taxable income after the recovery of all investment in the policy.  However, certain distributions which must be made in order to enable the policy to continue to qualify as a life insurance policy for federal income tax purposes if policy benefits are reduced during the first 15 Policy Years may be treated in whole or in part as ordinary income subject to tax.

Loans from or secured by a Policy that is not a MEC are generally not treated as distributions.

Finally, distributions from, and loans from (or secured by), a policy that is not a MEC are not subject to the 10% additional tax.

Multiple Policies .  All MECs that we issue (and that our affiliates issue) to the same Owner during any calendar year are treated as one MEC for purposes of determining the amount includible in the Owner ' s income when a taxable distribution occurs.

Policy Loans .  In general, interest you pay on a loan from a policy will not be deductible.  If a loan from a policy that is not a MEC is outstanding when the policy is canceled or lapses, the amount of the outstanding indebtedness will be added to the amount distributed and will be taxed accordingly.   Before taking out a policy loan, you should consult a tax adviser as to the tax consequences.

Business Uses of the Policy   The policy may be used in various arrangements, including nonqualified deferred compensation or salary continuance plans, split dollar insurance plans, executive bonus plans, retiree medical benefit plans, and others.  The tax consequences of these plans may vary depending on the particular facts and circumstances of each individual arrangement.  The IRS has also recently issued new guidance on split dollar insurance plans.  In addition, Internal Revenue Code Section 409A, which sets forth new rules for taxation of nonqualified deferred compensation, was added to the Code for deferrals after December 31, 2004.   Therefore, if you are contemplating using the Policy in any arrangement the value of which depends in part on its tax consequences, you should be

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sure to consult a tax adviser as to tax attributes of the arrangement .  In recent years, moreover, Congress has adopted new rules relating to life insurance owned by businesses.  Any business contemplating the purchase of a new Policy or a change in an existing Policy should consult a tax adviser.  Also, see, " Special Considerations For Life Insurance Policies Owned By Corporations or Other Employers, " below.

Tax Shelter Regulations .  Prospective Owners should consult a tax adviser about the treatment of the policy under the Treasury Regulations applicable to tax shelters.

Withholding .  To the extent that policy distributions are taxable, they are generally subject to withholding for the recipient ' s federal income tax liability.  Recipients can generally elect, however, not to have tax withheld from distributions.

Alternate Minimum Tax .  There may be an indirect tax upon the income in the policy or the proceeds of a policy under the federal corporate alternative minimum tax, if the Owner is subject to that tax.

Continuation of Policy Beyond Age 100 .  The tax consequences of continuing the policy beyond the Insured ' s 100th year are unclear.  You should consult a tax adviser if you intend to keep the policy in force beyond the Insured ' s 100 th year.

Other Policy Owner Tax Matters .  The transfer of the policy or designation of a Beneficiary may have federal, state, and/or local transfer and inheritance tax consequences, including the imposition of gift, estate, and generation-skipping transfer taxes.  For example, the transfer of the policy to, or the designation as a Beneficiary of, or the payment of proceeds to, a person who is assigned to a generation which is two or more generations below the generation assignment of the Owner may have gift, estate, and/or generation-skipping transfer tax consequences under federal tax law.  The individual situation of each Owner or Beneficiary will determine the extent, if any, to which federal, state, and local transfer and inheritance taxes may be imposed and how ownership or receipt of the Policy proceeds will be treated for purposes of federal, state, and local estate, inheritance, generation-skipping, and other taxes.

Possible Tax Law Changes .  While the likelihood of legislative or other changes is uncertain, there is always a possibility that the tax treatment of the Policy could change by legislation or otherwise.  It is even possible that any legislative change could be retroactive (effective prior to the date of the change).   You should consult a tax adviser with respect to legislative developments and their effect on the Policy.

Special Rules for Pension and Profit-Sharing Plans .  If a policy is purchased by a pension or profit-sharing plan, or similar deferred compensation arrangement, the federal, state and estate tax consequences could differ.  A competent tax adviser should be consulted in connection with such a purchase.

The amounts of life insurance that may be purchased on behalf of a participant in a pension or profit-sharing plan are limited.  The current cost of insurance for the net amount at risk is treated as a " current fringe benefit " and must be included annually in the plan participant ' s gross income.  The amount of this cost should be reported to the participant annually.  If the plan participant dies while covered by the plan and the policy proceeds are paid to the participant ' s Beneficiary, then the excess of the death benefit over the policy account value is not subject to the federal income tax.  However, the policy account value will generally be taxable to the extent it exceeds the participant ' s cost basis in the policy.  Policies owned under these types of plans may be subject to restrictions under the Employee Retirement Income Security Act of 1974 ( " ERISA " ).  You should consult a qualified tax adviser regarding ERISA.

Department of Labor ( " DOL " ) regulations impose requirements for participant loans under retirement plans covered by ERISA.  Plan loans must also satisfy tax requirements to be treated as nontaxable.  Plan loan requirements and provisions may differ from Policy loan provisions.  Failure of plan loans to comply with the requirements and provisions of the DOL regulations and of tax law may result in adverse tax consequences and/or adverse consequences under ERISA.  Plan fiduciaries and participants should consult a qualified tax adviser before requesting a loan under a Policy held in connection with a retirement plan.

Special Rules for 403(b) Arrangements.   If a policy is purchased in connection with a Section 403(b) tax-sheltered annuity program, the " Special Rules for Pension and Profit-Sharing Plans " discussed above may be applicable.  In July, 2007, the IRS and the Treasury Department released final regulations that prohibit the purchase of a life insurance policy in a 403(b) plan after September 23, 2007.  In addition, premiums, distributions and other transactions with respect to the policy must be administered, in coordination with the Section 403(b) annuity, to comply with the requirements of Section 403(b) of the Code.  A competent tax adviser should be consulted.

Same-Sex Marriage.   Pursuant to Section 3 of the federal Defense of Marriage Act ( " DOMA " ), same-sex marriages currently are not recognized for purposes of federal law. Therefore, the favorable income-deferral options afforded by federal tax law to an opposite-sex spouse under Internal Revenue Code sections 72(s) and 401(a)(9) are currently NOT available to a same-sex spouse. Same-sex spouses who own or are considering the purchase of annuity products that provide benefits based upon status as a spouse should consult a tax advisor. To the extent that an annuity contract or certificate accords to spouses other rights or benefits that are not affected by DOMA, same-sex spouses remain entitled to such rights or benefits to the same extent as any annuity holder ' s spouse.

Foreign Tax Credits .  To the extent that any underlying eligible portfolio makes the appropriate election, certain foreign taxes paid by the portfolio will be treated as being paid by us, and we may deduct or claim a tax credit for such taxes.  The benefits of any such deduction or credit will not be passed through to policy Owners.

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Accelerated Death Benefit Rider.   The federal income tax consequences associated with the Accelerated Death Benefit Rider are uncertain.   You should consult a qualified tax adviser about the consequences of requesting payment under this Rider.  See " Death Benefit – Accelerated Death Benefit. "

Other Supplemental Benefits and Riders .  A further discussion of the tax consequences associated with particular supplemental benefits and riders available under the Policy can be found in the SAI.

Special Considerations For Life Insurance Policies Owned By Corporations or Other Employers

In 2006, President Bush signed the Pension Protection Act of 2006, which contains new Code Sections 101(j) and 6039I, which affect the tax treatment of life insurance policies owned by the employer of the Insured.  These provisions are generally effective for life insurance policies issued after August 17, 2006.  However, policies issued after that date pursuant to a Section 1035 exchange are excluded from the operation of these new provisions, provided that the policy received in the exchange does not have a material increase in death benefit or other material change with respect to the old policy.

New Section 101(j) provides the general rule that, with respect to an employer-owned life insurance policy, the amount of death benefit payable directly or indirectly to the employer that may be excluded from income cannot exceed the sum of premiums and other payments paid by the policyholder for the policy.  Consequently, under this general rule, the entire death benefit, less the cost to the policyholder, will be taxable.  Although Section 101(j) is not clear, if lifetime distributions from the policy are made as a nontaxable return of premium, it appears that the reduction would apply for Section 101(j) purposes and reduce the amount of premiums for this purpose.

There are two exceptions to this general rule of taxability, provided that statutory notice, consent, and information requirements are satisfied.  These requirements are that, prior to the issuance of the policy to a company: (a) the employee is notified in writing that the employer intends to insure the employee ' s life, and the maximum face amount for which the employee could be insured at the time that the policy is issued, (b) the employee provides written consent to being insured under the policy and that such coverage may continue after the Insured terminates employment, and (c) the employee is informed in writing that the employer will be a beneficiary of any proceeds payable upon the death of the employee.  If the employer fails to meet all of those requirements, then neither exception can apply.

The 2 exceptions are as follows.  First, if proper notice and consent are given and received, and if the Insured was an employee at any time during the 12-month period before the Insured ' s death, then new Section 101(j) would not apply.

Second, if proper notice and consent are given and received and, at the time that the policy is issued the Insured is either a director, a " highly compensated employee " (within the meaning of Section 414(q) of the Code without regard to paragraph (a)(B)(ii) thereof), or a " highly compensated individual " (within the meaning of Section 105(h)(5), except " 35% " is substituted for " 25% " in paragraph (C) thereof), then the new Section 101(j) would not apply.

Code Section 6039I requires any policyholder of an employer-owned policy to file an annual return showing (a) the number of employees of the policyholder, (b) the number of such employees insured under employee-owned policies at the end of the year, (c) the total amount of insurance in force with respect to those policies at the end of the year, (d) the name, address, taxpayer identification number and type of business of the policyholder, and (e) that the policyholder has a valid consent for each Insured (or, if all consents are not obtained, the number of insured employees for whom such consent was not obtained).  Proper recordkeeping is also required by this section.

It is your responsibility to (a) provide the proper notice to each Insured, (b) obtain the proper consent from each Insured, (c) inform each Insured in writing that you will be the beneficiary of any proceeds payable upon the death of the Insured, and (d) file the annual return required by Section 6039I.  If you fail to provide the necessary notice and information, or fail to obtain the necessary consent, the death benefit will be taxable to you when received.  If you fail to file a properly completed return under Section 6039I, you could be required to pay a penalty.

Split Dollar Arrangements

You may enter into a split dollar arrangement with another Owner or another person(s) whereby the payment of premiums and the right to receive the benefits under the policy (i.e., Net Cash Surrender Value or Insurance Proceeds) are split between the parties.  There are different ways of allocating these rights.  For example, an employer and employee might agree that under a Policy on the life of the employee, the employer will pay the premiums and will have the right to receive the Net Cash Surrender Value.  The employee may designate the Beneficiary to receive any Insurance Proceeds in excess of the Net Cash Surrender Value.  If the employee dies while such an arrangement is in effect, the employer would receive from the Insurance Proceeds the amount that he would have been entitled to receive upon surrender of the policy and the employee ' s Beneficiary would receive the balance of the proceeds.

No transfer of policy rights pursuant to a split dollar arrangement will be binding on us unless in writing and received by us at our Service Center.

The Sarbanes-Oxley Act of 2002 (the " Act " ) prohibits, with limited exceptions, publicly traded companies, including non-U.S. companies that have securities listed on exchanges in the United States, from extending, directly or through a subsidiary, many types of personal loans to their directors or executive officers.  It is possible that this prohibition may be interpreted as applying to split

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dollar life insurance policies for directors and executive officers of such companies, since such insurance arguably can be viewed as involving a loan from the employer for at least some purposes.

Although the prohibition on loans is generally effective as of July 30, 2002, there is an exception for loans outstanding as of the date of enactment, so long as there is no material modification to the loan terms and the loan is not renewed after July 30, 2002.   Any affected business contemplating the payment of a premium on an existing policy, or the purchase of a new policy, in connection with a split dollar life insurance arrangement should consult legal counsel.

In addition, the IRS and Treasury Department issued guidance that substantially affects the tax treatment of split dollar arrangements.   The parties who elect to enter into a split dollar arrangement should consult their own tax advisers regarding the tax consequences of such an arrangement, and before entering into or paying additional premiums with respect to such arrangement

VOTING RIGHTS

All of the assets held in the Subaccounts of the Separate Account will be invested in shares of corresponding Portfolios of the Funds.  The Funds do not hold routine annual shareholders' meetings.  Shareholders' meetings will be called whenever each Fund believes that it is necessary to vote to elect the Board of Directors of the Fund and to vote upon certain other matters that are required by the 1940 Act to be approved or ratified by the shareholders of a mutual fund.  NLIC is the legal owner of Fund shares and as such has the right to vote upon any matter that may be voted upon at a shareholders' meeting.  However, in accordance with its view of present applicable law, NLIC will vote the shares of the Funds at meetings of the shareholders of the appropriate Fund or Portfolio in accordance with instructions received from Owners.  Fund shares held in each Subaccount for which no timely instructions from Owners are received will be voted by NLIC in the same proportion as those shares in that Subaccount for which instructions are received.

Each Owner having a voting interest will be sent proxy material and a form for giving voting instructions.  Owners may vote, by proxy or in person, only as to the Portfolios that correspond to the Subaccounts in which their Policy values are allocated.  The number of shares held in each Subaccount attributable to a Policy for which the Owner may provide voting instructions will be determined by dividing the Policy's value in that Subaccount by the net asset value of one share of the corresponding Portfolio as of the record date for the shareholder meeting.  Fractional shares will be counted.  For each share of a Portfolio for which Owners have no interest, NLIC will cast votes, for or against any matter, in the same proportion as Owners vote.  What this means to you is that when only a small number of policy owners vote, each vote has a greater impact on, and may control the outcome of the vote.

If required by state insurance officials, NLIC may disregard voting instructions if such instructions would require shares to be voted so as to cause a change in the investment objectives or policies of one or more of the Portfolios, or to approve or disapprove an investment policy or investment adviser of one or more of the Portfolios.  In addition, NLIC may disregard voting instructions in favor of changes initiated by an Owner or the Fund's Board of Directors provided that NLIC's disapproval of the change is reasonable and is based on a good faith determination that the change would be contrary to state law or otherwise inappropriate, considering the Portfolio's objectives and purposes, and the effect the change would have on NLIC.  If NLIC does disregard voting instructions, it will advise Owners of that action and its reasons for such action in the next semi-annual report to Owners.

The voting rights described in this prospectus are created under applicable federal securities laws and regulations.  If these laws or regulations change to eliminate the necessity to solicit voting instructions from Owners or restrict voting rights, NLIC reserves the right to proceed in accordance with any such changed laws or regulations.

DISTRIBUTION OF POLICIES

The current distributor of the Policies is Nationwide Investment Services Corporation ("NISC") located at One Nationwide Plaza, Columbus, Ohio 43215, an affiliate of NLIC.  Until May 1, 2009, the Policies were distributed by Nationwide Securities, LLC ("NSLLC") (formerly, 1717 Capital Management Company), located at One Nationwide Plaza, Columbus, Ohio 43215, a wholly owned indirect subsidiary of NLIC.

The Policies were sold on a continuous basis until December 31, 2008 by licensed insurance agents in those states where the Policies could lawfully be sold. Beginning January 1, 2009 no new policies will be sold, but agents may continue to accept additional premium on existing Policies.  Agents are registered representatives of broker dealers registered under the Securities Exchange Act of 1934 who are member firms of the Financial Industry Regulatory Authority ("FINRA").

Gross first year commissions paid by NLIC on the sale of these Policies provided by NISC are approximately 91% of the target premium plus 2% of any excess premium payments.  We pay gross renewal commissions in years 2 through 10 on the sale of the Policies provided by NISC that will not exceed 2% of actual premium payment, and will be 0% in policy years 11 and thereafter.  Expense allowances and bonuses may also be paid, and firms may receive annual renewal compensation of up to 0.25% of the unloaned Policy Account Value.

NISC received no compensation as principal underwriter of variable life insurance policies and variable annuity contracts offered by insurance company subsidiaries of Nationwide Financial Services, Inc. during 2009, 2008, or 2007.  NSLLC received $6,996,236, $11,699,242, and $16,493,648, during 2009, 2008, and 2007, respectively, as principal underwriter of the Policies and of other

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variable life insurance policies and variable annuity contracts offered by NLIC and its affiliates.  However, NSLLC did not retain any of the compensation it received as principal underwriter during the past 3 fiscal years.

Policy Pricing

During the Policy's early years, the expenses we incur in distributing and establishing the Policy exceed the deductions we take.  Nevertheless, we expect to make a profit over time because variable life insurance is intended to be a long-term financial investment.  Accordingly, we have designed the Policy with features and investment options that we believe support and encourage long-term ownership.

We make many assumptions and account for many economic and financial factors when we establish the Policy's fees and charges.  The following is a discussion of some of the factors that are relevant to the Policy's pricing structure.

Distribution, Promotional, and Sales Expenses.Commissions to broker-dealer firms are one of the promotional and sales expenses we incur when distributing the Policy.  During the first Policy Year, the maximum sales commission payable to firms will be approximately 91% of Premiums paid up to a specified amount, and 2% of Premiums paid in excess of that amount.  During Policy Years 2 through 10, the maximum sales commission will not be more than 2% of Premiums paid, and after Policy Year 10, the maximum sales commission will be 0% of Premiums paid.  Further, for each Premium received within 10 years following an increase in Face Amount, a commission on that Premium will be paid up to the specified amount for the increase in each year; the commission will be calculated using the commission rates for the corresponding Policy Year.  Expense allowances and bonuses may also be paid, and firms may receive annual renewal compensation of up to 0.25% of the unloaned Policy Account Value.  Firms may be required to return first year commission (less the deferred sales charge) if the Policy is not continued through the first Policy Year.  In lieu of these premium-based commissions, we may pay an equivalent asset-based commission, or a combination of the two.  Individual registered representatives typically receive a portion of the commissions paid to their broker-dealer firm, depending on their particular arrangement.  The amount of commissions we pay depends on factors such as the amount of premium we receive from the broker-dealer firm and the scope of the services they provide.

In addition to commissions, we may also furnish marketing and expense allowances to certain broker-dealer firms based on our assessment of that firm's capabilities and demonstrated willingness to promote and market our products.  The firms determine how these allowances are spent.  If you would like to know the exact compensation arrangement associated with this product, you should consult your registered representative.

Information on Portfolio Payments

Our Relationship with the Portfolios.The Portfolios incur expenses each time they sell, administer, or redeem their shares.  The separate account aggregates Policy owner purchase, redemption, and transfer requests and submits net or aggregated purchase/redemption requests to each Portfolio daily.  The separate account (not the Policy Owners) is the Portfolio shareholder.  When the separate account aggregates transactions, the Portfolio does not incur the expense of processing individual transactions it would normally incur if it sold its shares directly to the public.  We incur these expenses instead.

We also incur the distribution costs of selling the Policy (as discussed above), which benefit the Portfolios by providing Policy Owners with Subaccount options that correspond to the Portfolios.

An investment adviser or subadviser of a Portfolio or its affiliates may provide us or our affiliates with wholesaling services that assist in the distribution of the Policy and may pay us or our affiliates to participate in educational and/or marketing activities.  These activities may provide the adviser or subadviser (or their affiliates) with increased exposure to persons involved in the distribution of the Policy.

Types of Payments We Receive.In light of the above, the Portfolios or their affiliates make certain payments to us or our affiliates (the "payments").  The amount of these payments is typically based on a percentage of assets invested in the Portfolios attributable to the policies and other variable policies we and our affiliates issue, but in some cases may involve a flat fee.  These payments may be used by us for any corporate purpose, which include reducing the prices of the policies, paying expenses that we or our affiliates incur in promoting, marketing, and administering the policies and the Portfolios, and achieving a profit.

We or our affiliates receive the following types of payments:

· Portfolio 12b-1 fees, which are deducted from Portfolio assets;

· Sub-transfer agent fees or fees pursuant to administrative service plans adopted by the Portfolio, which may be deducted from Portfolio assets; and

· Payments by a Portfolio's adviser or subadviser (or its affiliates).  Such payments may be derived, in whole or in part, from the advisory fee, which is deducted from Portfolio assets and is reflected in mutual fund charges.

Furthermore, we benefit from assets invested in our affiliated Portfolios (i.e., Nationwide Variable Insurance Trust) because our affiliates also receive compensation from the Portfolios for investment advisory, administrative, transfer agency, distribution, and/or other services.  Thus, we may receive more revenue with respect to affiliated Portfolios than unaffiliated Portfolios.

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We took into consideration the anticipated payments from the Portfolios when we determined the charges imposed under the policies (apart from fees and expenses imposed by the Portfolios).  Without these payments, we would have imposed higher charges under the Policy.

Amount of Payments We Receive.  For the year ended December 31, 2009 , the Portfolio payments we and our affiliates received from the Portfolios did not exceed 0.55% (as a percentage of the average daily net assets invested in the Portfolios) offered through this Policy or other variable policies that we and our affiliates issue.  Payments from investment advisers or subadvisers to participate in educational and/or marketing activities have not been taken into account in this percentage.

Most Portfolios or their affiliates have agreed to make payments to us or our affiliates, although the applicable percentages may vary from Portfolio to Portfolio and some may not make any payments at all.  Because the amount of the actual payments we or our affiliates receive depends on the assets of the Portfolios attributable to the Policy, we and our affiliates may receive higher payments from Portfolios with lower percentages (but greater assets) than from Portfolios that have higher percentages (but fewer assets).

For additional information related to the amount of payments Nationwide receives, go to www.nationwide.com.

Identification of Portfolios.   We may consider several criteria when identifying the Portfolios, including some or all of the following:  investment objectives, investment process, investment performance, risk characteristics, investment capabilities, experience and resources, investment consistency, and fund expenses.  Another factor we consider during the identification process is whether the Portfolio's adviser or subadviser is one of our affiliates or whether the Portfolio, its adviser, its subadviser(s), or an affiliate will make payments to us or our affiliates.

There may be Portfolios with lower fees, as well as other variable policies that offer Portfolios with lower fees.  You should consider all of the fees and charges of the Policy in relation to its features and benefits when making your decision to invest.  Please note that higher Policy and Portfolio fees and charges have a direct effect on your investment performance.

STATE VARIATIONS

Any state variations in the Policy are covered in a special policy form for use in that state.  The prospectus and SAI provide a general description of the Policy.  An Owner's actual Policy and any endorsements or riders are the controlling documents.  To review a copy of his or her Policy and its endorsements and riders, if any, the Owner should contact NLIC's Service Center.

LEGAL PROCEEDINGS

Nationwide Financial Services, Inc. (NFS, or collectively with its subsidiaries, " the Company " ) was formed in November 1996. NFS is the holding company for Nationwide Life Insurance Company (NLIC), Nationwide Life and Annuity Insurance Company (NLAIC) and other companies that comprise the life insurance and retirement savings operations of the Nationwide group of companies (Nationwide). This group includes Nationwide Financial Network (NFN), an affiliated distribution network that markets directly to its customer base. NFS is incorporated in Delaware and maintains its principal executive offices in Columbus, Ohio.

The Company is a party to litigation and arbitration proceedings in the ordinary course of its business.  It is often not possible to determine the ultimate outcome of the pending investigations and legal proceedings or to provide reasonable ranges of potential losses with any degree of certainty.  Some matters, including certain of those referred to below, are in very preliminary stages, and the Company does not have sufficient information to make an assessment of the plaintiffs ' claims for liability or damages.  In some of the cases seeking to be certified as class actions, the court has not yet decided whether a class will be certified or (in the event of certification) the size of the class and class period.  In many of the cases, the plaintiffs are seeking undefined amounts of damages or other relief, including punitive damages and equitable remedies, which are difficult to quantify and cannot be defined based on the information currently available.  The Company does not believe, based on information currently known by management, that the outcomes of such pending investigations and legal proceedings are likely to have a material adverse effect on the Company ' s consolidated financial position.  However, given the large and/or indeterminate amounts sought in certain of these matters and inherent unpredictability of litigation, it is possible that an adverse outcome in certain matters could have a material adverse effect on the Company ' s consolidated financial position or results of operations in a particular period.

In recent years, life insurance companies have been named as defendants in lawsuits, including class action lawsuits relating to life insurance and annuity pricing and sales practices.  A number of these lawsuits have resulted in substantial jury awards or settlements against life insurers other than the Company.

The financial services industry, including mutual fund, variable annuity, retirement plan, life insurance and distribution companies, has also been the subject of increasing scrutiny on a broad range of issues by regulators, legislators and the media over the past few years.  Numerous regulatory agencies, including the SEC, the Financial Industry Regulatory Authority and the New York State Attorney General, have commenced industry-wide investigations on such issues as late trading and market timing in connection with mutual funds and variable insurance contracts, and have commenced enforcement actions against some mutual fund and life insurance companies on those issues.  The Company has responded to information requests and/or subpoenas from the SEC in 2003 and the New York State Attorney General in 2005 in connection with investigations regarding market timing in certain mutual funds offered in insurance products sponsored by the Company.  The Company is not aware of any further action on these matters.

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In addition, state and federal regulators and other governmental bodies have commenced investigations, proceedings or inquiries relating to compensation and bidding arrangements and possible anti-competitive activities between insurance producers and brokers and issuers of insurance products, and unsuitable sales and replacements by producers on behalf of the issuer.  Also under investigation are compensation and revenue sharing arrangements between the issuers of variable insurance contracts and mutual funds or their affiliates, fee arrangements in retirement plans, the use of side agreements and finite reinsurance agreements, funding agreements issued to back MTN programs, recordkeeping and retention compliance by broker-dealers, and supervision of former registered representatives.  Related investigations, proceedings or inquiries may be commenced in the future.  The Company and/or its affiliates have been contacted by, self reported or received subpoenas from state and federal regulatory agencies and other governmental bodies, state securities law regulators and state attorneys general for information relating to certain of these investigations, including those relating to compensation, revenue sharing and bidding arrangements, anti-competitive activities, unsuitable sales or replacement practices, fee arrangements in retirement plans, the use of side agreements and finite reinsurance agreements, and funding agreements backing the MTN program.  The Company is cooperating with regulators in connection with these inquiries and will cooperate with Nationwide Mutual Insurance Company (NMIC) in responding to these inquiries to the extent that any inquiries encompass NMIC ' s operations.

A promotional and marketing arrangement associated with the Company ' s offering of a retirement plan product and related services in Alabama is under investigation by the Alabama Attorney General, which assumed the investigation from the Alabama Securities Commission.  The Company currently expects that any damages paid to settle this matter will not have a material adverse impact on its consolidated financial position.  It is not possible to predict what effect, if any, the outcome of this investigation may have on the Company ' s retirement plan operations with respect to promotional and marketing arrangements in general in the future.

These proceedings are expected to continue in the future and could result in legal precedents and new industry-wide legislation, rules and regulations that could significantly affect the financial services industry, including mutual fund, retirement plan, life insurance and annuity companies.  These proceedings also could affect the outcome of one or more of the Company ' s litigation matters.  There can be no assurance that any litigation or regulatory actions will not have a material adverse effect on the Company ' s consolidated financial position or results of operations in the future.

On September 10, 2009, NRS was named in a lawsuit filed in the Circuit Court for Montgomery County, Alabama entitled Twanna Brown, Individually and on behalf of all other persons in Alabama who are similarly situated, v. Nationwide Retirement Solutions, Inc., Alabama State Employees Association, PEBCO, Inc., Edwin " Mac " McArthur, Steve Walkley, Glenn Parker, Ulysses Lavender, Diana McLain, Randy Hebson, and Robert Wagstaff; and Unknown Defendants A-Z .  On January 22, 2010, Brown filed an Amended Complaint alleging in Count One, that all the defendants were involved in a civil conspiracy and seeks to recover actual damages, forfeiture of all other payments and/or salaries to be the fruit of such other payments, punitive damages and costs and attorneys fees. In Count Two, although NRS is not named, it is alleged that the remaining defendants breached their fiduciary duties and seeks actual damages, forfeiture of all other payments and/or salaries to be the fruit of such other payments, punitive damages and costs and attorneys fees. In Count Three, although NRS is not named, the plaintiff seeks declaratory relief that the individual defendants breached their fiduciary duties, seeks injunctive relief permanently removing said defendants from their respective offices in the Alabama State Employees Association (ASEA) and PEBCO and costs and attorneys fees. In Count Four, it alleges that any money Nationwide paid belonged exclusively to ASEA for the use and benefit of its membership at large and not for the personal benefit of the individual defendants.  Plaintiff seeks to recover actual damages from the individual defendants, forfeiture of all other payments and/or salaries to be the fruit of such other payments, punitive damages and costs and attorneys fees. On February 5, 2010, the Company filed a motion to dismiss, or in the alternative, a motion to stay the amended complaint.  On February 9, 2010, the individual defendants filed a motion to dismiss the amended complaint.  On December 13, 2009, the plaintiff filed a motion to consolidate this case with Nationwide Retirement Solutions, Inc. v. Alabama State Personnel Board, PEBCO, Inc. and Alabama State Employees Association . The Company continues to defend this case vigorously.

On November 20, 2007, NRS and NLIC were named in a lawsuit filed in the Circuit Court of Jefferson County, Alabama entitled Ruth A. Gwin and Sandra H. Turner, and a class of similarly situated individuals v. Nationwide Life Insurance Company, Nationwide Retirement Solutions, Inc., Alabama State Employees Association, PEBCO, Inc. and Fictitious Defendants A to Z . On December 2, 2008, NRS and NLIC were named in an Amended Class Action Complaint filed in the Circuit Court of Jefferson County, Alabama entitled Ruth A. Gwin, Steven E. Coker, Sandra H. Turner, and a class of similarly situated individuals v. Nationwide Life Insurance Company, Nationwide Retirement Solutions, Inc, Alabama State Employees Association, Inc., PEBCO, Inc. and Fictitious Defendants A to Z claiming to represent a class of all participants in the ASEA Plan, excluding members of the Deferred Compensation Committee, members of the Board of Control, ASEA ' s directors, officers and board members, and PEBCO directors, officers and board members. The class period is from November 20, 2001 to the date of trial.  In the amended class action complaint, the plaintiffs allege breach of fiduciary duty, wantonness and breach of contract.  The amended class action complaint seeks a declaratory judgment, an injunction, an appointment of an independent fiduciary to protect Plan participants, disgorgement of amounts paid, reformation of Plan documents, compensatory damages and punitive damages, plus interest, attorneys ' fees and costs and such other equitable and legal relief to which plaintiffs and class members may be entitled.  Also, on December 2, 2008, the plaintiffs filed a motion for preliminary injunction seeking an order requiring periodic payments made by NRS and/or NLIC to ASEA or PEBCO to be held in a trust account for the benefit of Plan participants.  On December 16, 2008, the Companies filed their Answer. On April 28, 2009, the court entered an order denying the plaintiffs ' motion for preliminary injunction.  NRS and NLIC continue to defend this case vigorously.

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On July 11, 2007, NLIC was named in a lawsuit filed in the United States District Court for the Western District of Washington at Tacoma entitled Jerre Daniels-Hall and David Hamblen, Individually and on behalf of All Others Similarly Situated v. National Education Association, NEA Member Benefits Corporation, Nationwide Life Insurance Company, Security Benefit Life Insurance Company, Security Benefit Group, Inc., Security Distributors, Inc., et. al .  The plaintiffs seek to represent a class of all current or former National Education Association (NEA) members who participated in the NEA Valuebuilder 403(b) program at any time between January 1, 1991 and the present (and their heirs and/or beneficiaries).  The plaintiffs allege that the defendants violated the Employee Retirement Income Security Act of 1974, as amended (ERISA) by failing to prudently and loyally manage plan assets, by failing to provide complete and accurate information, by engaging in prohibited transactions, and by breaching their fiduciary duties when they failed to prevent other fiduciaries from breaching their fiduciary duties.  The complaint seeks to have the defendants restore all losses to the plan, restoration of plan assets and profits to participants, disgorgement of endorsement fees, disgorgement of service fee payments, disgorgement of excessive fees charged to plan participants, other unspecified relief for restitution, declaratory and injunctive relief, and attorneys ' fees.    On May 23, 2008, the Court granted the defendants ' motion to dismiss.  On June 19, 2008, the plaintiffs filed a notice of appeal.  On July 10, 2009, the Court of Appeals heard oral argument.  NLIC continues to defend this lawsuit vigorously.

On November 15, 2006, NFS, NLIC and NRS were named in a lawsuit filed in the United States District Court for the Southern District of Ohio entitled Kevin Beary, Sheriff of Orange County, Florida, In His Official Capacity, Individually and On Behalf of All Others Similarly Situated v. Nationwide Life Insurance Co., Nationwide Retirement Solutions, Inc. and Nationwide Financial Services, Inc .  The plaintiff sought to represent a class of all sponsors of 457(b) deferred compensation plans in the United States that had variable annuity contracts with the defendants at any time during the class period, or in the alternative, all sponsors of 457(b) deferred compensation plans in Florida that had variable annuity contracts with the defendants during the class period.  The class period is from January 1, 1996 until the class notice is provided.  The plaintiff alleged that the defendants breached their fiduciary duties by arranging for and retaining service payments from certain mutual funds.  The complaint sought an accounting, a declaratory judgment, a permanent injunction and disgorgement or restitution of the service fee payments allegedly received by the defendants, including interest.  On January 25, 2007, NFS, NLIC and NRS filed a motion to dismiss.  On September 17, 2007, the Court granted the motion to dismiss.  On October 1, 2007, the plaintiff filed a motion to vacate judgment and for leave to file an amended complaint.  On September 15, 2008, the Court denied the plaintiffs ' motion to vacate judgment and for leave to file an amended complaint.  On February 3, 2010, the Sixth Circuit Court of Appeals affirmed the District Court ' s dismissal of this case.   NFS, NLIC and NRS continue to defend this lawsuit vigorously.

On August 15, 2001, NFS and NLIC were named in a lawsuit filed in the United States District Court for the District of Connecticut entitled Lou Haddock, as trustee of the Flyte Tool & Die, Incorporated Deferred Compensation Plan, et al v. Nationwide Financial Services, Inc. and Nationwide Life Insurance Company .  In the plaintiffs ' sixth amended complaint, filed November 18, 2009, they amended the list of named plaintiffs and claim to represent a class of qualified retirement plan trustees under ERISA that purchased variable annuities from NLIC.  The plaintiffs allege that they invested ERISA plan assets in their variable annuity contracts and that NLIC and NFS breached ERISA fiduciary duties by allegedly accepting service payments from certain mutual funds.  The complaint seeks disgorgement of some or all of the payments allegedly received by NFS and NLIC, other unspecified relief for restitution, declaratory and injunctive relief, and attorneys ' fees.  On November 6, 2009, the Court granted the plaintiff ' s motion for class certification and certified a class of " All trustees of all employee pension benefit plans covered by ERISA which had variable annuity contracts with NFS and NLIC or whose participant ' s had individual variable annuity contracts with NFS and NLIC at any time from January 1, 1996, or the first date NFS and NLIC began receiving payments from mutual funds based on a percentage of assets invested in the funds by NFS and NLIC, whichever came first, to the date of November 6, 2009 " .  Also on November 6, 2009, the Court denied plaintiffs ' motion to strike NFS and NLIC ' s counterclaim for breach of fiduciary duty against the Trustees, in the event NFS and NLIC are held to be a fiduciary at trial, and granted H. Grady Chandler ' s motion to intervene.  On November 23, 2009, NFS and NLIC filed a rule 23(f) petition asking the Second Circuit Court of Appeals to hear an appeal of the District Court ' s order granting class certification. On December 2, 2009, NFS and NLIC filed an answer to the 6th Amended Complaint.  On January 29, 2010, the Companies filed a motion for class certification against the four named plaintiffs, as trustees of their respective retirement plans and against the trustees of other ERISA retirement plans who become members of the class certified in this lawsuit, for breach of fiduciary duty to the plans because the trustees approved and accepted the advantages of the allegedly unlawful " revenue sharing " payments.  NFS and NLIC continue to defend this lawsuit vigorously.

The general distributor, Nationwide Investment Services Corporation, is not engaged in litigation of a material nature.

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FINANCIAL STATEMENTS

NLIC's consolidated financial statements and the financial statements of the Separate Account are contained in the SAI.  NLIC's consolidated financial statements should be distinguished from the Separate Account's financial statements and Owners should consider NLIC's consolidated financial statements only as bearing upon its ability to meet its obligations under the Policies.  For a free copy of these consolidated financial statements and/or the SAI, Owners should call or write to NLIC at its Service Center.

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DEFINITIONS

Application	The application the Owner must complete to purchase a Policy plus all forms required by NLIC or applicable law.
Attained Age	The Issue Age of the Insured plus the number of full Policy Years since the Policy Date.
Base Premium	Total scheduled premium minus the premium processing charge and any premium for supplementary benefits and extra-premium class.
Beneficiary	The person(s) or entity(ies) designated to receive all or some of the Proceeds when the Insured dies.  The Beneficiary is designated in the Application or if subsequently changed, as shown in the latest change filed with NLIC.  If no Beneficiary survives and unless otherwise provided, the Insured's estate will be the Beneficiary.
Cash Value	The total amount invested under the Policy.  It is the sum of the Cash Values in the Subaccounts.  If there is an outstanding policy loan, the Cash Value in the General Account will be added to the Cash Value of the Subaccounts to determine the Cash Value of the Policy.
Death Benefit	The greatest of: (1) the applicable Guaranteed Minimum Death Benefit for the Policy; (2) the Face Amount plus the amount by which the Cash Value on the date of death exceeds the appropriate Special Premium Payment Single Premium; or (3) the Cash Value on the date of death times the appropriate Death Benefit Factor.  This amount is adjusted to determine the Proceeds at death which is paid to the Beneficiary.
Evidence of Insurability	The medical records or other documentation that NLIC may require to satisfy the Policy's underwriting standards.  NLIC may require different and/or additional evidence depending on the Insured's Premium Class; for example, NLIC generally requires more documentation for Insureds in classes with extra ratings.  NLIC also may require different and/or additional evidence depending on the transaction requested; for example, NLIC may require more documentation for the issuance of a Policy than to reinstate a Policy.
Face Amount	The Face Amount is specified in the Policy.  If scheduled premiums are paid when due and there are no outstanding policy loans, this will be the minimum Death Benefit.  The Owner may not increase or decrease the Face Amount.
Grace Period	The 61-day period allowed for payment of a premium following the date NLIC mails notice of the amount required to keep the Policy in force.
Insured	The person upon whose life the Policy is issued.
Issue Age	The age of the Insured at his or her birthday nearest the Policy Date.  The Issue Age is stated in the Policy.
Loan Value	The maximum amount that may be borrowed under the Policy.
Minimum Face Amount	The Minimum Face Amount is $50,000.
Monthly Deductions	The amount deducted from the Cash Value on each Policy Processing Day.  It includes the Cost of Insurance Charge, Administration Charge, Minimum Death Benefit Guarantee Charge, First Year Policy Charge, and the Supplementary Benefit Charge.
Net Amount at Risk	The amount by which the Death Benefit exceeds the Cash Value.
Net Cash Surrender Value	The Cash Value minus any applicable Surrender Charge and any outstanding policy loans and accrued interest.
Net Premiums	The remainder of a Base Premium after deduction of the 7½% charge for sales load and state premium tax or the remainder of an unscheduled premium after deduction of the Premium Expense Charge.
Owner	The person(s) or entity(ies) entitled to exercise the rights granted in the Policy.
Policy Anniversary	The same day and month as the Policy Date in each later year.

35

Policy Date	The date set forth in the Policy that is used to determine Policy Years and Policy Processing Days.  The Policy Date is generally the same as the Policy Issue Date but may be another date mutually agreed upon by NLIC and the proposed Insured.
Policy Issue Date	The date on which the Policy is issued.  It is used to measure suicide and contestable periods.
Policy Processing Day	The day in each calendar month which is the same day of the month as the Policy Date.  The first Policy Processing Day is the Policy Date.
Policy Year	A year that starts on the Policy Date or on a Policy Anniversary.
Premium Class	The classification of the Insured for cost of insurance purposes.  The standard classes are non-smoker and smoker.  There also are classes with extra ratings.
Premium Expense Charge	The amount deducted from a premium payment which consists of the Premium Processing Charge, the Sales Charge, and the state and local premium tax charge.
Proceeds	The net amount to be paid to the Beneficiary when the Insured dies or when the Policy is surrendered.
SAI	The Statement of Additional Information ("SAI") that contains additional information regarding the Policy.  The SAI is not a prospectus, and should be read together with the prospectus.  To obtain a copy of the SAI, write or call the Service Center.
Special Premium Payment Single Premium	An amount used to determine whether the Owner is required to pay scheduled premiums to keep the Policy in full force.
Separate Account	The Nationwide Provident VLI Separate Account 1.
Service Center	The Technology and Service Center located at 5100 Rings Road, RR1-04- D4 , Columbus, Ohio 43017.
Subaccount	A division of the Separate Account.  The assets of each Subaccount are invested exclusively in a corresponding Portfolio that is part of one of the Funds.
Surrender Charge	The amount deducted from the Cash Value upon lapse or surrender of the Policy during the first 9 Policy Years.
Valuation Day	Each day that the New York Stock Exchange is open for business and any other day on which there is a sufficient degree of trading with respect to the Separate Account's portfolio of securities to materially affect the value of the Separate Account.  As of the date of this prospectus, NLIC is open whenever the New York Stock Exchange is open, other than the Fridays following Thanksgiving and Christmas.
Valuation Period	The period beginning at the close of business on one Valuation Day (which is when the New York Stock Exchange closes, usually 4:00 p.m., Eastern Time) and continuing until the close of business on the next Valuation Day.  Each Valuation Period includes a Valuation Day and any non-Valuation Day or consecutive non-Valuation Days immediately preceding it.

36

APPENDIX A

CALCULATION OF NET INVESTMENT FACTOR

AND CASH VALUE OF THE POLICY

Following is a description of how the net investment factor is calculated and how the net investment factor is used to determine the Cash Value of the Policy.

Net Investment Factor.  Each Separate Account has its own net investment factor.  The net investment factor of the Separate Account for a Valuation Period is a divided by b, minus c, where:

a.  is:

1. the value of the assets in the Separate Account for the preceding Valuation Period; plus

2. the investment income and capital gains, realized or unrealized, credited to those assets during the Valuation Period for which the net investment factor is being determined; minus

3. the capital losses, realized or unrealized, charged against those assets during the Valuation Period; minus

4. any amount charged against the Separate Account for taxes, or any amount NLIC sets aside during the Valuation Period as a reserve for taxes attributable to the operation or maintenance of the Separate Account; and

b.  is the value of the assets for the preceding Valuation Period; and

c.  is a charge no greater than 0.60% per year (.001644% for each day in the Valuation Period) for mortality and expense risks.

The charge in c. is expressed as a percentage of assets in the Subaccount at the beginning of each day during the Valuation Period.

Calculation of Cash Value.  When the first net scheduled premium is allocated to the Separate Account, the Cash Value of each Subaccount on the Policy Date will equal the Net Premium allocated to that Subaccount minus the first Monthly Deduction allocated to that Subaccount.  Thereafter, on each Valuation Day, the Cash Value of each Subaccount will equal:

1. the Cash Value of the Subaccount on the previous Valuation Day times the net investment factor for the current Valuation Period; plus

2. any Net Premiums received during the current Valuation Period which are allocated to that Separate Account; plus

3. any Cash Value which, during the current Valuation Period:

 a.  is transferred to the Separate Account from the General Account when any loan amount is repaid, including interest credited to loaned amounts; and/or

 b.  is transferred to the Subaccount from another Subaccount when requested by the Owner; minus

4. any Cash Value which, during the current Valuation Period:

 a.  is transferred from the Separate Account to the General Account when the Owner borrows on the Policy or fails to pay interest when due; and/or

 b.  is transferred from the Subaccount to another Subaccount when requested by the Owner; plus

5. any dividends credited to the Separate Account during the current Valuation Period; minus

6. the Monthly Deductions allocated to the Separate Account during the current Valuation Period; minus

7. any partial withdrawals during the current Valuation Period which are allocated to the Separate Account.

The Cash Value of the Policy is equal to: (a) the sum of the Cash Value of each Subaccount; plus (b) the Cash Value in the General Account attributable to any outstanding policy loans.

37

APPENDIX B

PORTFOLIO INFORMATION

Below is a list of the available Subaccounts and information about the corresponding underlying mutual funds in which they invest.  The underlying mutual funds in which the Subaccounts invest are designed primarily as investments for variable annuity contracts and variable life insurance policies issued by insurance companies.  There is no guarantee that the investment objectives will be met.

Please refer to the prospectus for each underlying mutual fund for more detailed information.

Designations Key:

STTF:             The underlying mutual fund corresponding to this Subaccount assesses (or reserves the right to assess) a short-term trading fee (see " Short-Term Trading Fees " earlier in the prospectus).

FF:             The underlying mutual fund corresponding to this Subaccount primarily invests in other mutual funds.  Therefore, a proportionate share of the fees and expenses of any acquired funds are indirectly borne by investors.  As a result, investors in this Subaccount may incur higher charges than if the assets were invested in an underlying mutual fund that does not invest in other mutual funds.  Please refer to the prospectus for this underlying mutual fund for more information.

Alger American Fund - Alger Small Cap Growth Portfolio: Class I-2 Shares (formerly, Alger American Fund - Alger American Small Cap Growth: Class O Shares)

Investment Adviser:	Fred Alger Management, Inc.
Investment Objective:	Long-term capital appreciation.

Fidelity Variable Insurance Products Fund - VIP Asset Manager Portfolio: Growth Initial Class (formerly, Fidelity Variable Insurance Products Fund - VIP Asset Manager Portfolio: Initial Class)

Investment Adviser:	Fidelity Management & Research Company Boston, MA
Sub-adviser:	FMR Co., Inc., Fidelity Management & Research (U.K.) Inc., Fidelity Research
	& Analysis Company, Fidelity Investments Money Management, Inc.,
	Fidelity Investments Japan Limited, Fidelity International Investment
	Advisors, Fidelity International Investment Advisors (U.K.) Limited
Investment Objective:	High total return.

Fidelity Variable Insurance Products Fund - VIP Contrafund® Portfolio: Initial Class

This Portfolio is only available in Policies issued before May 1, 2008

Investment Adviser:	Fidelity Management & Research Company Boston, MA
Sub-adviser:	FMR Co., Inc., Fidelity Investments Money Management, Inc., Fidelity
	Management & Research (U.K.) Inc., Fidelity Research & Analysis Company,
	Fidelity Investments Japan Limited, Fidelity International Investment
	Advisors, Fidelity International Investment Advisors (U.K.) Limited
Investment Objective:	Long-term capital appreciation.

Fidelity Variable Insurance Products Fund - VIP Equity-Income Portfolio: Initial Class

Investment Adviser:	Fidelity Management & Research Company Boston, MA
Sub-adviser:	FMR Co., Inc., Fidelity Management & Research (U.K.) Inc., Fidelity Research
	& Analysis Company, Fidelity Investments Japan Limited, Fidelity
	International Investment Advisors, Fidelity International Investment Advisors
	(U.K.) Limited
Investment Objective:	Reasonable income.

Fidelity Variable Insurance Products Fund - VIP Growth Portfolio: Initial Class

Investment Adviser:	Fidelity Management & Research Company Boston, MA
Sub-adviser:	FMR Co., Inc., Fidelity Management & Research (U.K.) Inc., Fidelity Research
	& Analysis Company, Fidelity International Investment Advisors, Fidelity
	International Investment Advisors (U.K.) Limited, Fidelity Investments Japan
	Limited
Investment Objective:	Capital appreciation.

Fidelity Variable Insurance Products Fund - VIP High Income Portfolio: Initial Class

Investment Adviser:	Fidelity Management & Research Company Boston, MA
Sub-adviser:	FMR Co., Inc., Fidelity Research & Analysis Company, Fidelity Investments
	Japan Limited, Fidelity International Investment Advisors, Fidelity
	International Investment Advisors (U.K.) Limited
Investment Objective:	High level of current income while also considering growth of capital.

38

Fidelity Variable Insurance Products Fund - VIP Investment Grade Bond Portfolio: Initial Class

Investment Adviser:	Fidelity Management & Research Company Boston, MA
Sub-adviser:	Fidelity Investments Money Management, Inc., Fidelity Research & Analysis
	Company, Fidelity International Investment Advisors, Fidelity International
	Investment Advisors (U.K.) Limited
Investment Objective:	High level of current income.

Fidelity Variable Insurance Products Fund - VIP Overseas Portfolio: Initial Class

This Portfolio is no longer available to accept transfers or new premium payments effective May 1, 2004

Investment Adviser:	Fidelity Management & Research Company Boston, MA
Sub-adviser:	FMR Co., Inc., Fidelity Management & Research (U.K.) Inc., Fidelity Research
	& Analysis Company, Fidelity International Investment Advisors, Fidelity
	International Investment Advisors (U.K.) Limited, Fidelity Investments Japan
	Limited
Investment Objective:	Long-term capital growth.

Fidelity Variable Insurance Products Fund - VIP Overseas Portfolio: Initial Class R

Investment Adviser:	Fidelity Management & Research Company Boston, MA
Sub-adviser:	FMR Co., Inc., Fidelity Management & Research (U.K.) Inc., Fidelity Research
	& Analysis Company, Fidelity International Investment Advisors, Fidelity
	International Investment Advisors (U.K.) Limited, Fidelity Investments Japan
	Limited
Investment Objective:	Long-term capital growth.

Designation: STTF

MFS® Variable Insurance Trust II - MFS® International Value Portfolio: Service Class

Investment Adviser:	Massachusetts Financial Services Company
Investment Objective:	The fund ' s investment objective is to seek capital appreciation.   MFS normally
	invests the fund ' s assets primarily in foreign equity securities, including
	emerging market equity securities.

Nationwide Variable Insurance Trust - AllianceBernstein NVIT Global Fixed Income Fund: Class VI

This Portfolio is only available in Policies issued before May 1, 2010

Investment Adviser:	Nationwide Fund Advisors
Sub-adviser:	AllianceBernstein L.P.
Investment Objective:	The Fund seeks a high level of current income consistent with preserving capital.

Designation: STTF

Nationwide Variable Insurance Trust - Neuberger Berman NVIT Multi Cap Opportunities Fund: Class I

Investment Adviser:	Nationwide Fund Advisors
Sub-adviser:	Neuberger Berman Management Inc.
Investment Objective:	The fund seeks long-term capital growth.

Nationwide Variable Insurance Trust - NVIT Emerging Markets Fund: Class III (formerly, Nationwide Variable Insurance Trust - Gartmore NVIT Emerging Markets Fund: Class III)

Investment Adviser:	Nationwide Fund Advisors
Sub-adviser:	Baring International Investment Limited
Investment Objective:	The Fund seeks long-term capital growth by investing primarily in equity
	securities of companies located in emerging market countries.

Designation: STTF

Nationwide Variable Insurance Trust - NVIT Government Bond Fund: Class IV

Investment Adviser:	Nationwide Fund Advisors
Sub-adviser:	Nationwide Asset Management, LLC
Investment Objective:	The fund seeks as high level of income as is consistent with the preserving of
	capital.

Nationwide Variable Insurance Trust - NVIT Growth Fund: Class IV

Investment Adviser:	Nationwide Fund Advisors
Sub-adviser:	Aberdeen Asset Management, Inc.
Investment Objective:	The Fund seeks long-term capital appreciation.

39

Nationwide Variable Insurance Trust - NVIT Investor Destinations Moderate Fund: Class II

Investment Adviser:	Nationwide Fund Advisors
Investment Objective:	The NVIT Investor Destinations Moderate Fund ( " Moderate Fund " or the
	" Fund " ) seeks a high level of total return
	consistent with a moderate level of risk as compared to other Investor
	Destinations Funds.

Designation: STTF, FF

Nationwide Variable Insurance Trust - NVIT Money Market Fund: Class IV

Investment Adviser:	Nationwide Fund Advisors
Sub-adviser:	Federated Investment Management Company
Investment Objective:	The Fund seeks as high a level of current income as is consistent with
	preserving capital and maintaining liquidity.

Designation: STTF

Nationwide Variable Insurance Trust - NVIT Multi-Manager International Value Fund: Class III

Investment Adviser:	Nationwide Fund Advisors
Sub-adviser:	AllianceBernstein L.P.; JPMorgan Investment Management, Inc.
Investment Objective:	The Fund seeks long-term capital appreciation.

Designation: STTF

Nationwide Variable Insurance Trust - NVIT Multi-Manager International Value Fund: Class IV

This Portfolio is no longer available to accept transfers or new premium payments effective May 1, 2004

Investment Adviser:	Nationwide Fund Advisors
Sub-adviser:	AllianceBernstein L.P.; JPMorgan Investment Management, Inc.
Investment Objective:	The Fund seeks long-term capital appreciation.

Designation: STTF

Nationwide Variable Insurance Trust - NVIT Multi-Manager Mid Cap Growth Fund: Class I

Investment Adviser:	Nationwide Fund Advisors
Sub-adviser:	American Century Investment Management, Inc.
Investment Objective:	The fund seeks long-term capital growth.

Designation: STTF

Nationwide Variable Insurance Trust - NVIT Multi-Manager Small Cap Value Fund: Class IV

Investment Adviser:	Nationwide Fund Advisors
Sub-adviser:	Aberdeen Asset Management, Inc.; Epoch Investment Partners, Inc.; J.P.
	Morgan Investment Management Inc.
Investment Objective:	The Fund seeks capital appreciation.

Designation: STTF

Nationwide Variable Insurance Trust - NVIT Multi-Manager Small Company Fund: Class IV

Investment Adviser:	Nationwide Fund Advisors
Sub-adviser:	Aberdeen Asset Management, Inc.; Gartmore Global Partners; Morgan Stanley
	Investment Management; Neuberger Berman Management, Inc.; Putnam
	Investment Management, LLC; Waddell & Reed Investment Management
	Company
Investment Objective:	The Fund seeks capital appreciation.

Designation: STTF

Nationwide Variable Insurance Trust - NVIT Nationwide Fund: Class IV

Investment Adviser:	Nationwide Fund Advisors
Sub-adviser:	Aberdeen Asset Management, Inc.
Investment Objective:	The Fund seeks total return through a flexible combination of capital
	appreciation and current income.

Designation: STTF

Nationwide Variable Insurance Trust - NVIT S&P 500 Index Fund: Class IV

Investment Adviser:	Nationwide Fund Advisors
Sub-adviser:	BlackRock Investment Management, LLC
Investment Objective:	The Fund seeks long-term capital appreciation.

Designation: STTF

40

Nationwide Variable Insurance Trust - Oppenheimer NVIT Large Cap Growth Fund: Class I

Investment Adviser:	Nationwide Fund Advisors
Sub-adviser:	OppenheimerFunds, Inc.
Investment Objective:	The Fund seeks long-term capital growth.

Designation: STTF

Nationwide Variable Insurance Trust - Templeton NVIT International Value Fund: Class III

Investment Adviser:	Nationwide Fund Advisors
Sub-adviser:	Templeton Investment Counsel, LLC
Investment Objective:	The Fund seeks to maximize total return consisting of capital appreciation
	and/or current income.

Designation: STTF

Nationwide Variable Insurance Trust - Van Kampen NVIT Comstock Value Fund: Class IV

Investment Adviser:	Nationwide Fund Advisors
Sub-adviser:	Van Kampen Asset Management
Investment Objective:	The Fund ' s investment objective is to seek capital growth and income through
	investments in equity securities, including common stocks, preferred stocks,
	and convertible securities.

Designation: STTF

Neuberger Berman Advisers Management Trust - AMT Short Duration Bond Portfolio: I Class

Investment Adviser:	Neuberger Berman Management LLC
Sub-adviser:	Neuberger Berman Fixed Income LLC
Investment Objective:	Highest available current income consistent with liquidity and low risk to
	principal; total return is a secondary goal.

Van Eck Variable Insurance Products Trust -  Van Eck VIP Emerging Markets Fund: Initial Class (formerly, Van Eck Worldwide Insurance Trust - Worldwide Emerging Markets Fund: Initial Class)

This Portfolio is no longer available to accept transfers or new premium payments effective May 1, 2004

Investment Adviser:	Van Eck Associates Corporation
Investment Objective:	Long-term capital appreciation by investing primarily in equity securities in
	emerging markets around the world.

Van Eck Variable Insurance Products Trust - Van Eck VIP Emerging Markets Fund: Class R1 (formerly, Van Eck Worldwide Insurance Trust - Worldwide Emerging Markets Fund: Class R)

This Portfolio is only available in Policies issued before May 1, 2003

Investment Adviser:	Van Eck Associates Corporation
Investment Objective:	Long-term capital appreciation by investing primarily in equity securities in
	emerging markets around the world.

Designation: STTF

Van Eck Variable Insurance Products Trust - Van Eck VIP Global Bond Fund: Class R1 (formerly, Van Eck Worldwide Insurance Trust - Worldwide Bond Fund: Class R)

This Portfolio is only available in Policies issued before May 1, 2003

Investment Adviser:	Van Eck Associates Corporation
Investment Objective:	High total return – income plus capital appreciation – by investing globally,
	primarily in a variety of debt securities.

Designation: STTF

Van Eck Variable Insurance Products Trust - Van Eck VIP Global Bond Fund: Initial Class (formerly, Van Eck Worldwide Insurance Trust - Worldwide Bond Fund: Initial Class)

This Portfolio is no longer available to accept transfers or new premium payments effective May 1, 2004

Investment Adviser:	Van Eck Associates Corporation
Investment Objective:	High total return – income plus capital appreciation – by investing globally,
	primarily in a variety of debt securities.

Van Eck Variable Insurance Products Trust - Van Eck VIP Global Hard Assets Fund: Class R1 (formerly, Van Eck Worldwide Insurance Trust - Worldwide Hard Assets Fund: Class R)

Investment Adviser:	Van Eck Associates Corporation
Investment Objective:	Long-term capital appreciation by investing primarily in hard asset securities.
	Income is a secondary consideration.

Designation: STTF

41

Van Eck Variable Insurance Products Trust - Van Eck VIP Global Hard Assets Fund: Initial Class (formerly, Van Eck Worldwide Insurance Trust - Worldwide Hard Assets Fund: Initial Class)

This Portfolio is no longer available to accept transfers or new premium payments effective May 1, 2004

Investment Adviser:	Van Eck Associates Corporation
Investment Objective:	Long-term capital appreciation by investing primarily in hard asset securities.
	Income is a secondary consideration.

42

To learn more about this Policy, you should read the Statement of Additional Information (the "SAI") dated the same date as this prospectus.  For a free copy of the SAI, to receive personalized illustrations of Death Benefits, Net Cash Surrender Values, and Cash Values, and to request other information about this policy please call our Service Center at 1-800-688-5177 or write to us at our Service Center at Nationwide Life Insurance Company, 5100 Rings Road, RR1-04- D 4, Dublin, Ohio 43017 -1522 .

The SAI has been filed with the SEC and is incorporated by reference into this prospectus.  The SEC maintains an Internet website (http://www.sec.gov) that contains the SAI and other information about NLIC and the policy.  Information about NLIC and the policy (including the SAI) may also be reviewed and copied at the SEC's Public Reference Room in Washington, DC, or may be obtained, upon payment of a duplicating fee, by writing the Public Reference Section of the SEC, 100 F Street NE, Washington, DC 20549.  Additional information on the operation of the Public Reference Room may be obtained by calling the SEC at (202) 551-8090.

Investment Company Act of 1940 Registration File No.  811-04460.

Securities Act of 1933 Registration File No. 333-164118 .

Options

NATIONWIDE PROVIDENT VLI SEPARATE ACCOUNT 1

(Registrant)

NATIONWIDE LIFE INSURANCE COMPANY

(Depositor)

Main Administrative Office:

One Nationwide Plaza

Columbus, Ohio 43215

(614) 249-7111

Service Center:

5100 Rings Road, RR1-04- D 4

Dublin, Ohio 43017

(800) 688 - 5177

STATEMENT OF ADDITIONAL INFORMATION

Individual Modified Premium Variable Life Insurance Policy

This Statement of Additional Information ("SAI") contains additional information regarding the individual modified premium variable life insurance policy (the "Policy") offered by Nationwide Life Insurance Company ("NLIC").  This SAI is not a prospectus, and should be read together with the prospectus for the Policy dated May 1, 2010 and the prospectuses for the Funds.  The Owner may obtain a copy of these prospectuses FREE OF CHARGE by writing or calling NLIC at our address or phone number shown above.  Capitalized terms in this SAI have the same meanings as in the prospectus for the Policy.  No information is incorporated by reference into this SAI.

The date of this Statement of Additional Information is May 1, 2010 .

TABLE OF CONTENTS
Additional Policy Information	2	Performance Data	6
The Policy		Rating Agencies
Right to Contest the Policy		Money Market Yields
Misstatement of Age or Sex		Historical Performance of the Subaccounts
Suicide Exclusion		Standard & Poor's	7
Assignment		Additional Information	7
Beneficiary		Potential Conflicts of Interest
Change of Owner or Beneficiary		Policies Issued in Conjunction with Employee Benefit
Premium Classes		Plans
Effect of Policy Loans		Legal Developments Regarding Unisex Actuarial Tables
Delays in Payments of Policy Benefits		Safekeeping of Account Assets
Charge Discounts for Sales to Certain Policies		Policy Reports
Settlement Options		Records
Policy Termination		Independent Registered Public Accounting Firm
Policy Restoration Procedure		Additional Information About the Company
Supplemental Benefits and Riders	5	Additional Information About the Separate Account
Accelerated Death Benefit Rider		Other Information
Other Riders		Financial Statements	10
Illustrations	6

1

ADDITIONAL POLICY INFORMATION

The Policy

The Policy and the Application(s) attached thereto are the entire contract.  Only statements made in the Applications can be used to void the Policy or deny a claim.  NLIC assumes that all statements in an Application are made to the best of the knowledge and belief of the person(s) who made them, and, in the absence of fraud, those statements are considered representations and not warranties.  NLIC relies on those statements when it issues or changes a Policy.  Only the President or a Vice President of NLIC can agree to change or waive any provisions of the Policy and only in writing.  As a result of differences in applicable state laws, certain provisions of the Policy may vary from state to state.

Right to Contest the Policy

In issuing the Policy, NLIC relies on all statements made by or for the Owner and/or the Insured in the Application or in a supplemental Application.  Therefore, NLIC may contest the validity of a Policy based on material misstatements made in the Application (or any supplemental Application).

However, NLIC will not contest the Policy after the Policy has been in force during the Insured's lifetime for 2 years from the Policy Issue Date, except for nonpayment of premiums.  Likewise, NLIC will not contest any Policy change that requires Evidence of Insurability, or any reinstatement of the Policy, after such change or reinstatement has been in effect during the Insured's lifetime for 2 years.

Misstatement of Age or Sex

If the Insured's age or sex has been misstated in the Application, the Death Benefit and any benefits provided by riders will be such as the most recent Monthly Deductions would have provided at the correct age and sex.  No adjustment will be made to the Cash Value.

Suicide Exclusion

In the event of the Insured's suicide within two years from the Issue Date of the Policy (except where state law requires a shorter period) NLIC's liability is limited to the payment to the Beneficiary of a sum equal to the premiums paid less any policy loan and accrued interest and any withdrawal of excess Cash Value.

Assignment

The Owner may assign any and all rights under the Policy.  No assignment binds NLIC unless in writing and received by NLIC at its Service Center.  NLIC assumes no responsibility for determining whether an assignment is valid and the extent of the assignee's interest.  All assignments will be subject to any policy loan.  The interest of any Beneficiary or other person will be subordinate to any assignment.  A Beneficiary may not commute, encumber, or alienate Policy benefits, and to the extent permitted by applicable law, such benefits are not subject to any legal process for the payment of any claim against the payee.

Beneficiary

The Beneficiary is designated in the Application for the Policy, unless thereafter changed by the Owner during the Insured's lifetime by written notice to NLIC.  Any Proceeds for which there is not a designated Beneficiary surviving at the Insured's death are payable in a single sum to the Insured's executors or administrators.

Change of Owner or Beneficiary

As long as the Policy is in force, the Owner or Beneficiary may be changed by written request in a form acceptable to NLIC.  If two or more persons are named as Beneficiaries, those surviving the Insured will share the Proceeds equally, unless otherwise stated.  Any change will take effect as of the date it is signed, whether or not the Insured is living when the request is received by NLIC.  NLIC will not be responsible for any payment made or action taken before it receives the written request.  A change in the Policy's ownership may have federal income tax consequences.

Premium Classes

NLIC currently places each Insured into one of two standard Premium Classes – nonsmoker and smoker – or into a Premium Class with extra ratings.  In an otherwise identical Policy, an Insured in the standard class will have a lower cost of insurance rate than an Insured in a class with extra ratings.  Nonsmoking Insureds generally will incur lower cost of insurance rates than Insureds who are classified as smokers in the same Premium Class.

Since the nonsmoker designation is not available for Insureds under Attained Age 22 (21 in Texas), shortly before an Insured attains age 22, NLIC will notify the Insured about possible classification as a nonsmoker and will send the Insured an Application for Change in Premium Class.  If the Insured does not qualify as a nonsmoker or does not return the Application, cost of insurance rates will be based on the Premium Class shown in the Policy.  However, if the Insured returns the Application and qualifies as a nonsmoker, the cost of insurance rates will be changed to reflect the nonsmoker classification.

2

Effect of Policy Loans

A loan, whether or not repaid, will have a permanent effect on the Cash Value of the Policy and any Death Benefit in excess of the guaranteed minimum.  The effect could be favorable or unfavorable.  This is because the investment experience of the Subaccounts will only apply to the amount remaining in the Subaccounts and not to the amount transferred to the General Account.  If the investment experience of the Subaccounts is better than the amount being credited on loaned amounts, the Cash Value and hence Death Benefit in excess of the guaranteed minimum, will not increase as rapidly as they would have if no loan had been made.  However, if the investment experience of the Subaccounts is not as good as the rate being credited on loaned amounts, the Cash Value and excess Death Benefit will be higher than they would have been if no loan had been made.  The longer a loan is outstanding, the greater the effect is likely to be.

Delays in Payments of Policy Benefits

Proceeds under a Policy will ordinarily be paid to the Beneficiary within seven days after NLIC receives proof of the Insured's death at its Service Center and all other requirements are satisfied.  Proceeds will be paid in a single sum unless an alternative settlement option has been selected.

If Proceeds are payable in a single sum, interest at the annual rate of 3% or any higher rate declared by NLIC or required by law is paid on the Proceeds from the date of death until payment is made.

Any amounts payable as a result of surrender, withdrawal of excess Cash Value or policy loan will ordinarily be paid within seven days of receipt of written notices, permitted telephone, fax and/or e-mail requests at NLIC's Service Center in a form satisfactory to NLIC.

For Policies sold in New York State, if the amount payable as a result of surrender, withdrawal of excess Cash Value or a policy loan is not mailed or delivered to the Owner within 10 working days of receipt by NLIC of the request, interest will be added to such amount at the rate required by New York law.

Generally, the amount of a payment from the Subaccounts will be determined as of the date of receipt by NLIC of all required documents.  However, NLIC may defer the determination or payment of such amounts if the date for determining such amounts falls within any period during which: (1) the disposal or valuation of a Subaccount's assets is not reasonably practicable because the New York Stock Exchange is closed or conditions are such that, under the SEC's rules and regulations, trading is restricted or an emergency is deemed to exist; or (2) the SEC by order permits postponement of such actions for the protection of NLIC policyholders.  NLIC will allow interest, at a rate of 3% a year, on any payment NLIC defers for 30 days or more as described above.

Due to federal laws designed to counter terrorism and prevent money laundering by criminals, NLIC may be required to reject a premium payment.  NLIC also may be required to provide additional information about an Owner's account to government regulators.  In addition, NLIC also may be required to block an Owner's account and thereby refuse to pay any request for transfers, withdrawal of excess Cash Value, surrenders, loans, or Death Benefits, until instructions are received from the appropriate regulator.

The Owner may decide the form in which Proceeds will be paid.  During the Insured's lifetime, the Owner may arrange for the Proceeds to be paid in a lump sum or under a settlement option.  These choices are also available upon surrender of the Policy for its Net Cash Surrender Value and for payment of the Cash Value upon maturity of the Policy.  If no election is made, payment will be made in a lump sum.  The Beneficiary may also arrange for payment of the Proceeds in a lump sum or under a settlement option.  If the Beneficiary is changed, any prior arrangements with respect to the payment option will be canceled.

Charge Discounts for Sales to Certain Policies

The Policy is available for purchase by individuals, corporations, and other groups.  NLIC may reduce or waive certain charges (such as the Premium Expense Charge, Surrender Charge, Monthly Administration Charge, Minimum Death Benefit Guarantee Charge, Policy Charge, monthly Cost of Insurance Charge, or other charges) where the size or nature of such sales results in savings to NLIC with respect to sales, underwriting, administrative, or other costs.  NLIC also may reduce or waive charges on Policies sold to officers, directors, and employees of NLIC or its affiliates.  The extent and nature of the reduction or waiver may change from time to time, and the charge structure may vary.

Generally, NLIC reduce or waive charges based on a number of factors, including:

·   the number of Insureds;

·   the size of the group of purchasers;

·   the total premium expected to be paid;

·   total assets under management for the Owner;

·   the nature of the relationship among individual Insureds;

·   the purpose for which the Policies are being purchased;

·   the expected persistency of individual Policies; and

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·   any other circumstances which are rationally related to the expected reduction in expenses.

Reductions or waivers of charges will not discriminate unfairly among Owners.

Settlement Options

Settlement Options.  In lieu of a single sum payment on death or surrender, an election may be made to apply the Proceeds under any one of the fixed-benefit settlement options provided in the Policy.  A guaranteed interest rate of 3% per year applies to the options listed below.  Additional interest may be declared each year by NLIC in its sole discretion.  NLIC may also agree to other arrangements, including those that offer check writing capabilities with non-guaranteed interest rates.  Please refer to the Policy for more details.  As part of NLIC's General Account assets, settlement options Proceeds may be subject to claims of creditors.  Even if the Death Benefit under the Policy is excludible from income, payments under settlement options may not be excludible in full.  This is because earnings on the Death Benefit after the Insured's death are taxable and payments under the settlement options generally include such earnings.  Owners should consult a tax adviser as to the tax treatment of payments under settlement options.

Proceeds at Interest Option.  Left on deposit to accumulate with NLIC with interest payable at a rate of at least 3% per year.

Installments of a Specified Amount Option.  Payable in equal installments until Proceeds applied under the option and interest on the unpaid balance at 3% per year and any additional interest are exhausted.

Installments for a Specified Period Option.  Payable in the number of equal monthly installments set forth in the election.  Payments may be increased by additional interest which would increase the installments certain.  The guaranteed interest rate is 3% per year.

Life Income Option.  Payable in equal monthly installments during the payee's life.  Payments will be made either with or without a guaranteed minimum number.  If there is to be a minimum number of payments, they will be for either 120 or 240 months or until the Proceeds applied under the option are exhausted, as elected.

Joint and Survivor Life Income.  Payable in equal monthly installments, during the joint lives of the payee and one other person and during the life of the survivor.  The minimum number of payments will be for either 120 or 240 months, as elected.

Alternate Life Income Option.  Proceeds may be taken as a life income with the amount of the payments depending on the non-participating single premium immediate annuity rates at the time payments begin.

Policy Termination

The Policy will terminate on the earliest of:  (a) the maturity date; (b) the end of the Grace Period without a sufficient payment; (c) the date the Insured dies; or (d) the date the Policy is surrendered.

Policy Restoration Procedure

Requests to restore a surrendered policy must meet the following requirements:

· the request must be in writing and signed by the policy owner (if the surrender was a Code Section1035 exchange to a new policy with a different insurer, the signature of an officer of the replacing insurer is also required);

· the written request must be received by us within thirty days of the date the policy was surrendered (periods up to sixty days will be permitted based on the right to examine period applicable to replaced life insurance policies in the state where the policy was issued);

· the surrender Proceeds must be returned in their entirety; and

· the Insured must be alive on the date the restoration request is received.

No proof of insurability or additional underwriting will be required for requests to restore a surrendered policy that meet the above requirements.

A restored policy will be treated as if it had never been surrendered for all purposes, including Investment Experience, accrual of interest, and deduction of charges, resulting in the following:

· the returned surrender proceeds and any amount taken as a surrender charge will be used to purchase Accumulation Units according to your allocations in affect on, and priced as of, the surrender date;

· any charges that would otherwise have been assessed during the period of surrender will be assessed as of the date(s) they were due resulting in the cancellation of Accumulation Units priced as of the applicable date(s);

· interest will be credited on any allocation to a fixed investment option at the rate(s) in effect during the period of surrender;

· interest charged and credited on any Indebtedness will accrue at the rates in effect for the period of surrender; and

· any transfer of loan interest charged or credited that would have occurred during the period of surrender will been transferred as of the date(s) such transfers would have otherwise occurred.

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Policy restoration is not a contract right of the policy, it is an administrative procedure based on requirements of state insurance law and the terms are subject to change without notice at any time.

SUPPLEMENTAL BENEFITS AND RIDERS

Accelerated Death Benefit Rider

Applicants residing in states that have approved the Accelerated Death Benefit rider (the "ADBR") may generally elect to add it to their Policy at any time, subject to NLIC receiving satisfactory additional Evidence of Insurability.  The ADBR is not yet available in all states and the terms under which it is available may vary from state to state.  There is no assurance that the ADBR will be approved in all states or that it will be approved under the terms described herein.

The ADBR permits the Owner to receive, at his or her request and upon approval by NLIC, an accelerated payment of part of the Policy's Death Benefit generally when one of the following two events occurs:

1. Terminal Illness.  The Insured develops a non-correctable medical condition which is expected to result in his or her death within 12 months; or

2. Permanent Confinement to a Nursing Care Facility.  The Insured has been confined to a nursing care facility for 180 days and is expected to remain in such a facility for the remainder of his or her life.

There is no charge for adding the ADBR to a Policy.  However, an administrative charge, currently $100 and not to exceed $250, will be deducted from the accelerated death benefit at the time it is paid.

Tax Consequences of the Rider.  The federal income tax consequences associated with adding the ADBR or receiving the accelerated death benefit are uncertain.  Accordingly, Owners should consult a tax adviser before adding the ADBR to the Policy or requesting an accelerated death benefit.

Amount of the Accelerated Death Benefit.  The ADBR provides for a minimum accelerated death benefit payment of $10,000 and a maximum benefit payment equal to 75% of the eligible Death Benefit less 25% of any outstanding policy loans and accrued interest.  The ADBR also restricts the total of the accelerated death benefits paid from all life insurance policies issued to an Owner by NLIC and its subsidiaries to $250,000.  This $250,000 maximum may be increased, as provided in the ADBR, to reflect inflation.  The term eligible Death Benefit under the ADBR means:

The Proceeds payable under a Policy if the Insured died at the time a claim for an accelerated death benefit is approved by NLIC, minus:

1. any dividend accumulations;

2. any dividends due and not paid;

3. any dividend payable at death if the Insured died at such time;

4. any premium refund payable at death if the Insured died at such time; and

5. any insurance payable under the terms of any other rider attached to a Policy.

An Owner must submit written notice to request the accelerated death benefit.  The Owner may only request the accelerated death benefit once, except additional accelerated death benefits may be requested to pay premiums and policy loan interest.  There are no restrictions on the Owner's use of the benefit.  An Owner may elect to receive the accelerated death benefit as a lump sum or in 12 or 24 equal monthly installments.  If installments are elected and the Insured dies before all of the payments have been made, the present value (at the time of the Insured's death) of the remaining payments and the remaining Proceeds under the Policy will be paid to the Beneficiary in a lump sum.

Conditions for Receipt of the Accelerated Death Benefit.  In order to receive an accelerated death benefit payment, a Policy must be in force other than as Extended Term Insurance and an Owner must submit due proof of eligibility and a completed claim form to NLIC at its Service Center.  Due proof of eligibility means a written certification (described more fully in the ADBR), in a form acceptable to NLIC, from a treating physician stating that the Insured has a terminal illness or is expected to be permanently confined in a nursing care facility.  NLIC may request additional medical information from an Owner's physician and/or may require an independent physical examination (at its expense) before approving the claim for payment the accelerated death benefit.  NLIC will not approve a claim for an accelerated death benefit payment if a Policy is assigned in whole or in part, if the terminal illness or permanent confinement is the result of intentionally self-inflicted injury or if the Owner is required to elect it in order to meet the claims of creditors or to obtain a government benefit.

Operation of the Rider.  The accelerated death benefit is made in the form of a policy loan up to the amount of the maximum loan available under a Policy at the time the claim is approved, resulting in a policy loan being made in the amount of the requested benefit.  This policy loan operates as would any loan under the Policy.  To the extent that the amount of the requested accelerated death benefit

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exceeds the maximum available loan amount, the benefit will be advanced to the Owner and a lien will be placed on the Death Benefit payable under the Policy (the "Death Benefit lien") in the amount of this advance.  Interest will accrue daily, at a rate determined as described in the ADBR, on the amount of this advance and upon the death of the Insured the amount of the advance and accrued interest thereon is subtracted from the amount of Proceeds at death.

Effect on Existing Policy.  The Proceeds at death otherwise payable under a Policy at the time of an Insured's death will be reduced by the amount of any Death Benefit lien and accrued interest thereon.  In addition, if the Owner makes a request for a surrender, a policy loan, or a withdrawal of excess Cash Value, the Policy's Net Cash Surrender Value and Loan Value will be reduced by the amount of any outstanding Death Benefit lien plus accrued interest.  Therefore, depending upon the size of the Death Benefit lien, this may result in the Net Cash Surrender Value and the Loan Value being reduced to zero.  Premiums and policy loan interest must be paid when due.  However, if requested with the accelerated death benefit claim, future periodic planned premiums and policy loan interest may be paid automatically through additional accelerated death benefits.  In addition to lapse under the applicable provisions of the Policy, a Policy will also terminate on any Policy Anniversary when the Death Benefit lien exceeds the Proceeds.

Other Riders

In addition to the ADBR rider, the following riders offer other supplementary benefits.  Most are subject to various age and underwriting requirements and, unless otherwise indicated, must be purchased when the Policy is issued.  The cost of each rider is included in the Monthly Deductions.

Disability Waiver of Premium.  Providing that in the event of the Insured's total disability before the Policy Anniversary nearest the Insured's 60th birthday and continuing for at least 90 days (where permitted), NLIC will waive all scheduled premiums after the commencement and during the continuance of such disability.  NLIC may offer a 180 day extended waiting period for certain Insureds who do not qualify for the normal 90 day period.

Accidental Death Benefit.  Providing for an additional fixed amount of Death Benefit in the event the Insured dies from accidental bodily injury before the Policy Anniversary nearest the Insured's 70th birthday.

Guaranteed Purchase Option.  Providing that the Owner may purchase additional insurance on the Insured's life at specified times without Evidence of Insurability and under certain other circumstances.

ILLUSTRATIONS

Before you purchase the Policy and after the first Policy Anniversary, upon your request, you may ask for an illustration of future benefits under the Policy based upon the proposed Insured's Issue Age and Premium Class, the death benefit option, Face Amount, planned periodic premiums, and Riders requested.  Illustrations are provided free of charge.

PERFORMANCE DATA

Rating Agencies

Independent financial rating services, including Moody's, Standard & Poor's, and A.M. Best Company rank and rate us.  The purpose of these ratings is to reflect our financial strength or claims-paying ability.  The ratings are not intended to reflect the investment experience or financial strength of the Variable Account.  We may advertise these ratings from time to time.  In addition, we may include in certain advertisements, endorsements in the form of a list of organizations, individuals or other parties that recommend us or the Policies.  Furthermore, we may occasionally include in advertisements comparisons of currently taxable and tax-deferred investment programs, based on selected tax brackets, or discussions of alternative investment vehicles and general economic conditions.

Money Market Yields

We may advertise the "yield" and "effective yield" for the Money Market Subaccount.  Yield and effective yield are annualized, which means that it is assumed that the Portfolio generates the same level of net income throughout a year.

Yield is a measure of the net dividend and interest income earned over a specific seven-day period (which period will be stated in the advertisement) expressed as a percentage of the offering price of the Portfolio's units.  The effective yield is calculated similarly, but reflects assumed compounding, calculated under rules prescribed by the SEC.  Thus, effective yield will be slightly higher than yield due to the compounding.

Historical Performance of the Subaccounts

We will advertise historical performance of the Subaccounts in accordance with SEC prescribed calculations.  Please note that performance information is annualized.  However, if a Subaccount has been available in the Variable Account for less than one year, the performance information for that Subaccount is not annualized.  Performance information is based on historical earnings and is not intended to predict or project future results.

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STANDARD & POOR'S

"Standard & Poor's®," "S&P®," "S&P 500®," "Standard & Poor's 500," and "500" are trademarks of The McGraw-Hill Companies, Inc.  and have been licensed for use by NLIC and the Nationwide Variable Insurance Trust.  Neither the Policy nor the S&P 500 Index Fund is sponsored, endorsed, sold or promoted by Standard & Poor's, a division of The McGraw-Hill Companies, Inc. ("S&P").

S&P makes no representation or warranty, express or implied, to the Owners of the Policy and the S&P 500 Index Fund or any member of the public regarding the advisability of investing in securities generally or in the Policy and the S&P 500 Index Fund particularly or the ability of the S&P 500 Index to track general stock market performance.  S&P's only relationship to NLIC and Nationwide Variable Insurance Trust is the licensing of certain trademarks and trade names of S&P and of the S&P 500 Index which is determined, composed and calculated by S&P without regard to NLIC, Nationwide Variable Insurance Trust, the Policy, or the S&P 500 Index Fund.  S&P has no obligation to take the needs of NLIC, Nationwide Variable Insurance Trust, or the Owners of the Policy or the S&P 500 Index Fund into consideration in determining, composing or calculating the S&P 500 Index.  S&P is not responsible for and has not participated in the determination of the prices and amount of the Policy or the S&P 500 Index Fund or the timing of the issuance or sale of the Policy or the S&P 500 Index Fund or in the determination or calculation of the equation by which the Policy or the S&P 500 Index Fund are to be converted into cash.  S&P has no obligation or liability in connection with the administration, marketing or trading of the Policy or the S&P 500 Index Fund.

S&P does not guarantee the accuracy and/or the completeness of the S&P 500 Index or any data included therein and S&P shall have no liability for any errors, omissions, or interruptions therein.  S&P makes no warranty, express or implied, as to results to be obtained by NLIC, Nationwide Variable Insurance Trust, Owners of the Policy and the S&P 500 Index Fund, or any other person or entity from the use of the S&P 500 Index or any data included therein.  S&P makes no express or implied warranties, and expressly disclaims all warranties of merchantability or fitness for a particular purpose or use with respect to the S&P 500 Index or any data included therein.  Without limiting any of the foregoing, in no event shall S&P have any liability for any special, punitive, indirect, or consequential damages (including lost profits), even if notified of the possibility of such damages.

ADDITIONAL INFORMATION

Potential Conflicts of Interest

Shares of the Funds are sold to separate accounts of insurance companies that are not affiliated with NLIC or each other, a practice known as "shared funding."  They are also sold to separate accounts to serve as the underlying investment for both variable annuity contracts and variable life insurance policies, a practice known as "mixed funding."  As a result, there is a possibility that a material conflict may arise between the interest of Owners, whose Cash Values are allocated to the Subaccounts, and of owners of other contracts or policies whose values are allocated to one or more other separate accounts investing in any one of the Portfolios.  Shares of some of the Funds may also be sold directly to certain pension and retirement plans qualifying under Section 401 of the Internal Revenue Code of 1986, as amended.  As a result, there is a possibility that a material conflict may arise between the interests of Owners or owners of other policies or contracts (including policies issued by other companies), and such retirement plans or participants in such retirement plans.  In the event of any such material conflicts, NLIC will consider what action may be appropriate, including removing the Portfolio as an investment option under the Policies or replacing the Portfolio with another portfolio.  There are certain risks associated with mixed and shared funding and with the sale of shares to qualified pension and retirement plans, as disclosed in each Fund's prospectus.

Policies Issued in Conjunction with Employee Benefit Plans

Policies may be acquired in conjunction with employee benefit plans ("EBS Policies"), including the funding of qualified pension plans meeting the requirements of Section 401 of the Internal Revenue Code of 1986, as amended.  For EBS Policies, the maximum mortality rates used to determine the monthly Cost of Insurance Charge are based on the Commissioners' 1980 Standard Ordinary Mortality Tables NB and SB.  Under these tables, mortality rates are the same for male and female Insureds of a particular Attained Age and Premium Class.  Illustrations reflecting the premiums and charges for EBS Policies will be provided upon request to purchasers of these Policies.  There is no provision for misstatement of sex in the EBS Policies.  Also, the rates used to determine the amount payable under a particular settlement option will be the same for male and female Insureds.

Legal Developments Regarding Unisex Actuarial Tables

In 1983, the United States Supreme Court held in Arizona Governing Committee v. Norris that optional annuity benefits provided under an employee's deferred compensation plan could not, under Title VII of the Civil Rights Act of 1964, vary between men and women on the basis of sex.  In that case, the Supreme Court applied its decision only to benefits derived from contributions made on or after August 1, 1983.  Subsequent decisions of lower federal courts indicate that, in other factual circumstances, the Title VII prohibition of sex-distinct benefits may apply at an earlier date.  In addition, legislative, regulatory, or decisional authority of some states may prohibit the use of sex-distinct mortality tables under certain circumstances.  The Policies, other than Policies issued in states which require "unisex" policies (currently Montana) and EBS Policies, are based upon actuarial tables which distinguish between men and women and, thus, the Policy provides different benefits to men and women of the same age.  Accordingly, employers and employee organizations should consider, in consultation with legal counsel, the impact of these authorities on any

7

employment-related insurance or benefits program before purchasing the Policy and in determining whether an EBS Policy is appropriate.

Safekeeping of Account Assets

NLIC holds the Separate Account's assets physically segregated and apart from the General Account.  NLIC maintains records of all purchases and sales of Portfolio shares by each of the Subaccounts.  A fidelity bond in the amount of $25 million per occurrence and $50 million in the aggregate covering NLIC's officers and employees has been issued by Fidelity and Deposit Insurance Company (a division of Zurich American Insurance Company).

Policy Reports

At least once each Policy Year a statement will be sent to the Owner describing the status of the Policy, including setting forth the Face Amount, the current Death Benefit, any policy loans and accrued interest, the current Cash Value, the value in each Subaccount, premiums paid since the last report, charges deducted since the last report, any withdrawal of excess Cash Value since the last report, and the current Net Cash Surrender Value.  In addition, a statement will be sent to an Owner showing the status of the Policy following the transfer of amounts from one Subaccount to another (excluding automatic rebalancing of Cash Value), the taking of a loan, a repayment of a loan, a withdrawal of excess Cash Value, and the payment of any premiums (excluding those paid by bank draft or otherwise under the automatic payment plan).  An Owner may request that a similar report be prepared at other times.  NLIC may charge a reasonable fee for such requested reports and may limit the scope and frequency of such requested reports.  An Owner will be sent a semi-annual report containing the financial statements of each Portfolio in which he or she is invested.

Records

NLIC will maintain all records relating to the Separate Account at NLIC's Service Center.

Independent Registered Public Accounting Firm

The financial statements of Nationwide Provident VLI Separate Account-1 and the consolidated financial statements and schedules of Nationwide Life Insurance Company and subsidiaries for the periods indicated have been included herein in reliance upon the reports of KPMG LLP, independent registered public accounting firm, appearing elsewhere herein, and upon the authority of said firm as experts in accounting and auditing.  The audit report of KPMG LLP covering the December 31, 2009 consolidated financial statements and schedules of Nationwide Life Insurance Company and subsidiaries contains an explanatory paragraph that states that Nationwide Life Insurance Company and subsidiaries changed its method of evaluating other-than-temporary impairments of debt securities due to the adoption of new accounting requirements issued by the FASB, as of January 1, 2009.  KPMG LLP is located at 191 West Nationwide Blvd., Columbus, Ohio 43215.

Additional Information About the Company

Nationwide Life Insurance Company ("NLIC") is a stock life insurance company organized under Ohio law in March 1929, with its Main Administrative Office at One Nationwide Plaza, Columbus, Ohio 43215.  NLIC provides life insurance, annuities and retirement products.  NLIC is admitted to do business in all states, the District of Columbia and Puerto Rico.  NLIC is a member of the Nationwide group of companies, which is comprised of Nationwide Mutual Insurance Company ("NMIC") and all of its subsidiaries and affiliates.  NLIC is a wholly owned subsidiary of Nationwide Financial Services, Inc. ("NFS"), a holding company.  NLIC is an indirect wholly owned subsidiary, and NFS a direct wholly owned subsidiary, of NMIC.

On January 1, 2009, NFS became a private wholly owned subsidiary of NMIC.  NFS is the holding company of NLIC and other companies that comprise the retirement savings operations of the Nationwide group of companies.  The Nationwide group of companies is one of America's largest insurance and financial services family of companies, with combined assets of over $135 billion as of December 31, 2008.

Before January 1, 2010, the Policies were issued by Nationwide Life Insurance Company of America ("NLICA"), at that time a wholly owned subsidiary of NFS.  NLICA was chartered by the Commonwealth of Pennsylvania in 1865 under the name Provident Mutual Life Insurance Company ("PMLIC").  On October 1, 2002, PMLIC converted from a mutual insurance company to a stock insurance company, changed its name to Nationwide Life Insurance Company of America, and became a wholly owned subsidiary of NFS, pursuant to terms of a sponsored demutualization.  Effective following the close of business on December 31, 2009, NLICA merged with and into NLIC, and NLIC was the surviving company.

NLIC submits annual statements on our operations and finances to insurance officials in all states and jurisdictions in which it does business.  NLIC has filed the Policy with insurance officials in those jurisdictions in which the Policy is sold.

NLIC intends to reinsure a portion of the risks assumed under the Policies.

Additional Information About the Separate Account

On October 1, 2002, in connection with the sponsored demutualization (whereby NLICA converted from a mutual insurance company to a stock life insurance company, became a wholly-owned subsidiary of NFS, and changed its name from Provident Mutual Life Insurance Company to Nationwide Life Insurance Company of America), the Provident Mutual Variable Life Separate Account changed its name to the Nationwide Provident VLI Separate Account 1.

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Other Information

A registration statement has been filed with the SEC under the Securities Act of 1933, as amended, with respect to the Policies.  Not all the information set forth in the registration statement, and the amendments and exhibits thereto, has been included in the prospectus and this SAI.  Statements contained in this SAI concerning the content of the Policies and other legal instruments are intended to be summaries.  For a complete statement of the terms of these documents, reference should be made to the instruments filed with the SEC at 100 F Street NE, Washington, DC 20549.

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Financial Statements

All financial statements included in the SAI should be considered only as bearing on our ability to meet our obligations under the Policies.  They should not be considered as bearing on the investment performance of the assets held in the Separate Account.

Report of Independent Registered Public Accounting Firm

The Board of Directors of Nationwide Life Insurance Company and Contract Owners of Nationwide Provident VLI Separate Account-1:

We have audited the accompanying statement of assets, liabilities and contract owners’ equity of Nationwide Provident VLI Separate Account-1 (comprised of the sub-accounts listed in note 1 (collectively, “the Accounts”)) as of December 31, 2009, and the related statements of operations and changes in contract owners’ equity, and the financial highlights for each of the periods indicated herein. These financial statements and financial highlights are the responsibility of the Accounts’ management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 2009, by correspondence with the transfer agents of the underlying mutual funds. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the Accounts as of December 31, 2009, and the results of their operations, changes in contract owners’ equity, and financial highlights for each of the periods indicated herein, in conformity with U.S. generally accepted accounting principles.

/s/    KPMG LLP

Columbus, Ohio

March 10, 2010

Nationwide Provident VLI Separate Account 1

STATEMENT OF ASSETS, LIABILITIES AND CONTRACT OWNERS’ EQUITY

December 31, 2009

Assets:
Investments at fair value:
Small Cap Growth Portfolio - Class O Shares (AASCO)
955,797 shares (cost $16,632,592)	$	24,449,286
Variable Series Funds, Inc. - Global Allocation V.I. Fund - Class II (MLVGA2)
28,209 shares (cost $406,852)		420,599
Janus Aspen Series - Balanced Portfolio - Service Shares (JABS)
91,136 shares (cost $2,405,351)		2,545,426
Janus Aspen Series - Forty Portfolio - Service Shares (JACAS)
131,537 shares (cost $4,590,071)		4,363,090
Janus Aspen Series - Global Technology Portfolio - Service II Shares (JAGTS2)
141,400 shares (cost $612,625)		657,509
Janus Aspen Series - Global Technology Portfolio - Service Shares (JAGTS)
37,396 shares (cost $159,883)		170,153
Janus Aspen Series - INTECH Risk-Managed Core Portfolio - Service Shares (JARLCS)
2,847 shares (cost $21,611)		27,334
Janus Aspen Series - Overseas Portfolio - Service II Shares (JAIGS2)
173,597 shares (cost $8,956,464)		7,869,146
Janus Aspen Series - Overseas Portfolio - Service Shares (JAIGS)
58,671 shares (cost $2,933,413)		2,644,878
Investors Growth Stock Series - Initial Class (MIGIC)
73,669 shares (cost $717,266)		724,165
Value Series - Initial Class (MVFIC)
246,894 shares (cost $3,245,303)		2,913,346
Core Plus Fixed Income Portfolio - Class I (MSVFI)
78,600 shares (cost $841,073)		780,498
Emerging Markets Debt Portfolio - Class I (MSEM)
49,619 shares (cost $336,533)		384,545
U.S. Real Estate Portfolio - Class I (MSVRE)
50,558 shares (cost $360,429)		513,161
AllianceBernstein NVIT Global Fixed Income Fund - Class III (NVAGF3)
10,884 shares (cost $121,987)		119,942
AllianceBernstein NVIT Global Fixed Income Fund - Class VI (NVAGF6)
8,566 shares (cost $98,073)		94,401
American Century NVIT Multi Cap Value Fund - Class I (NVAMV1)
1,116 shares (cost $14,183)		14,224

(Continued)

Nationwide Provident VLI Separate Account 1

STATEMENT OF ASSETS, LIABILITIES AND CONTRACT OWNERS’ EQUITY, continued

American Funds NVIT Asset Allocation Fund - Class II (GVAAA2)
15,234 shares (cost $232,238)	$	238,874
American Funds NVIT Bond Fund - Class II (GVABD2)
31,919 shares (cost $329,818)		339,939
American Funds NVIT Global Growth Fund - Class II (GVAGG2)
50,210 shares (cost $1,001,825)		992,650
American Funds NVIT Growth Fund - Class II (GVAGR2)
22,243 shares (cost $1,194,512)		1,023,419
American Funds NVIT Growth-Income Fund - Class II (GVAGI2)
6,154 shares (cost $213,432)		206,346
Federated NVIT High Income Bond Fund - Class I (HIBF)
128,309 shares (cost $760,977)		846,841
Federated NVIT High Income Bond Fund - Class III (HIBF3)
260,584 shares (cost $1,678,083)		1,717,246
Gartmore NVIT Emerging Markets Fund - Class I (GEM)
136,450 shares (cost $1,775,689)		1,550,073
Gartmore NVIT Emerging Markets Fund - Class III (GEM3)
374,459 shares (cost $5,440,911)		4,246,362
Gartmore NVIT Global Utilities Fund - Class I (GVGU1)
53,095 shares (cost $624,304)		429,007
Gartmore NVIT Global Utilities Fund - Class III (GVGU)
132,221 shares (cost $1,408,649)		1,072,314
Gartmore NVIT International Equity Fund - Class VI (NVIE6)
62,762 shares (cost $451,917)		502,097
Neuberger Berman NVIT Multi Cap Opportunities Fund - Class I (NVNMO1)
1,955,887 shares (cost $14,822,773)		16,527,241
Neuberger Berman NVIT Socially Responsible Fund - Class II (NVNSR2)
2,114 shares (cost $14,714)		17,800
NVIT Cardinal Aggressive Fund - Class I (NVCRA1)
35,156 shares (cost $246,182)		295,662
NVIT Cardinal Balanced Fund - Class I (NVCRB1)
804 shares (cost $7,395)		7,674
NVIT Cardinal Capital Appreciation Fund - Class I (NVCCA1)
31,156 shares (cost $275,471)		283,211
NVIT Cardinal Conservative Fund - Class I (NVCCN1)
1,244 shares (cost $11,345)		12,518
NVIT Cardinal Moderate Fund - Class I (NVCMD1)
37,487 shares (cost $320,785)		349,751

(Continued)

Nationwide Provident VLI Separate Account 1

STATEMENT OF ASSETS, LIABILITIES AND CONTRACT OWNERS’ EQUITY, continued

NVIT Cardinal Moderately Aggressive Fund - Class I (NVCMA1)
64,238 shares (cost $557,515)	$	567,860
NVIT Cardinal Moderately Conservative Fund - Class I (NVCMC1)
355 shares (cost $3,242)		3,457
NVIT Core Bond Fund - Class I (NVCBD1)
17,501 shares (cost $176,102)		178,681
NVIT Core Plus Bond Fund - Class I (NVLCP1)
2,338 shares (cost $23,111)		25,227
NVIT Fund - Class IV (TRF4)
11,432,083 shares (cost $129,664,644)		92,599,876
NVIT Global Financial Services Fund - Class I (GVGF1)
22,060 shares (cost $178,348)		164,568
NVIT Global Financial Services Fund - Class III (GVGFS)
45,411 shares (cost $265,474)		339,222
NVIT Government Bond Fund - Class I (GBF)
43,770 shares (cost $516,898)		513,862
NVIT Government Bond Fund - Class IV (GBF4)
2,063,987 shares (cost $23,967,508)		24,210,570
NVIT Growth Fund - Class IV (CAF4)
1,566,216 shares (cost $16,240,988)		18,418,705
NVIT Health Sciences Fund - Class I (GVGH1)
30,566 shares (cost $313,725)		293,434
NVIT Health Sciences Fund - Class III (GVGHS)
46,087 shares (cost $460,159)		443,360
NVIT Investor Destinations Aggressive Fund - Class II (GVIDA)
560,369 shares (cost $6,033,992)		4,611,837
NVIT Investor Destinations Capital Appreciation Fund - Class II (NVDCA2)
80 shares (cost $1,043)		1,038
NVIT Investor Destinations Conservative Fund - Class II (GVIDC)
130,722 shares (cost $1,189,365)		1,290,227
NVIT Investor Destinations Moderate Fund - Class II (GVIDM)
4,584,462 shares (cost $41,741,639)		44,515,130
NVIT Investor Destinations Moderately Aggressive Fund - Class II (GVDMA)
2,619,629 shares (cost $29,975,884)		24,598,319
NVIT Investor Destinations Moderately Conservative Fund - Class II (GVDMC)
168,442 shares (cost $1,786,154)		1,652,420
NVIT Mid Cap Index Fund - Class I (MCIF)
216,274 shares (cost $3,589,655)		3,205,187

(Continued)

Nationwide Provident VLI Separate Account 1

STATEMENT OF ASSETS, LIABILITIES AND CONTRACT OWNERS’ EQUITY, continued

NVIT Multi-Manager International Growth Fund - Class III (NVMIG3)
200,162 shares (cost $1,528,873 )	$	1,729,400
NVIT Multi-Manager International Value Fund - Class III (GVDIV3)
1,815,473 shares (cost $25,874,334 )		17,773,481
NVIT Multi-Manager International Value Fund - Class IV (GVDIV4)
2,150,829 shares (cost $27,523,970 )		21,121,142
NVIT Multi-Manager Large Cap Growth Fund - Class I (NVMLG1)
179,197 shares (cost $1,386,688 )		1,557,223
NVIT Multi-Manager Large Cap Value Fund - Class I (NVMLV1)
169,112 shares (cost $1,286,539 )		1,412,084
NVIT Multi-Manager Mid Cap Growth Fund - Class I (NVMMG1)
5,800,594 shares (cost $39,940,086 )		48,666,981
NVIT Multi-Manager Mid Cap Value Fund - Class II (NVMMV2)
577,408 shares (cost $4,735,473 )		5,271,734
NVIT Multi-Manager Small Cap Growth Fund - Class I (SCGF)
130,903 shares (cost $1,891,091 )		1,610,111
NVIT Multi-Manager Small Cap Value Fund - Class IV (SCVF4)
2,195,281 shares (cost $24,744,243 )		18,220,831
NVIT Multi-Manager Small Company Fund - Class IV (SCF4)
1,260,120 shares (cost $25,324,569 )		18,196,129
NVIT Multi-Sector Bond Fund - Class I (MSBF)
185,606 shares (cost $1,655,315 )		1,534,960
NVIT S&P 500 Index Fund - Class IV (GVEX4)
16,280,413 shares (cost $131,117,388 )		126,173,202
NVIT Short Term Bond Fund - Class II (NVSTB2)
122,076 shares (cost $1,257,284 )		1,251,274
NVIT Technology & Communications Fund - Class I (GGTC)
71,732 shares (cost $242,223 )		243,889
NVIT Technology & Communications Fund - Class III (GGTC3)
161,695 shares (cost $585,231 )		554,616
NVIT U.S. Growth Leaders Fund - Class I (GVUG1)
157,070 shares (cost $1,481,206 )		1,178,023
Oppenheimer NVIT Large Cap Growth Fund - Class I (NVOLG1)
6,541 shares (cost $85,223 )		92,100
Templeton NVIT International Value Fund - Class III (NVTIV3)
832 shares (cost $11,312 )		11,567
Van Kampen NVIT Comstock Value Fund - Class IV (EIF4)
1,880,741 shares (cost $20,350,276 )		16,719,786

(Continued)

Nationwide Provident VLI Separate Account 1

STATEMENT OF ASSETS, LIABILITIES AND CONTRACT OWNERS’ EQUITY, continued

Van Kampen NVIT Real Estate Fund - Class I (NVRE1)
392,528 shares (cost $2,495,423 )	$	2,865,457
VaNVIT Money Market Fund - Class IV (SAM4)
59,095,508 shares (cost $59,095,508 )		59,095,508
Advisers Management Trust - Short Duration Bond Portfolio - I Class Shares (AMTB)
1,017,320 shares (cost $12,618,224 )		11,414,334
V.I. Basic Value Fund - Series I (AVBVI)
41,759 shares (cost $178,152 )		249,717
V.I. Capital Appreciation Fund - Series I (AVCA)
13,323 shares (cost $315,293 )		270,858
V.I. Capital Development Fund - Series I (AVCDI)
113,453 shares (cost $1,659,302 )		1,280,883
VPS Growth and Income Portfolio - Class A (ALVGIA)
125,145 shares (cost $2,614,226 )		1,902,203
VPS Small/Mid Cap Value Portfolio: Class A (ALVSVA)
205,022 shares (cost $3,118,439 )		2,749,349
VP Income & Growth Fund - Class I (ACVIG)
241,468 shares (cost $1,689,061 )		1,299,098
VP Inflation Protection Fund - Class II (ACVIP2)
269,017 shares (cost $2,817,967 )		2,886,551
VP International Fund - Class I (ACVI)
58,310 shares (cost $472,499 )		450,734
VP International Fund - Class III (ACVI3)
5 shares (cost $38 )		42
VP Mid Cap Value Fund - Class I (ACVMV1)
61,419 shares (cost $649,481 )		744,394
VP Ultra(R) Fund - Class I (ACVU1)
16,791 shares (cost $122,129 )		136,340
VP Value Fund - Class I (ACVV)
1,083,167 shares (cost $7,248,856 )		5,719,120
VP Vista(SM) Fund - Class I (ACVVS1)
871 shares (cost $11,286 )		11,488
Small Cap Stock Index Portfolio - Service Shares (DVSCS)
545,937 shares (cost $6,698,706 )		5,322,888
Stock Index Fund, Inc. - Initial Shares (DSIF)
269,562 shares (cost $8,255,453 )		7,092,175
Appreciation Portfolio - Initial Shares (DCAP)
78,883 shares (cost $2,831,389 )		2,476,915
Developing Leaders Portfolio - Initial Shares (DSC)
5,608 shares (cost $185,062 )		131,743

(Continued)

Nationwide Provident VLI Separate Account 1

STATEMENT OF ASSETS, LIABILITIES AND CONTRACT OWNERS’ EQUITY, continued

Capital Appreciation Fund II - Primary Shares (FVCA2P)
18,709 shares (cost $109,624 )	$	107,018
Clover Value Fund II - Primary Shares (FALF)
4,774 shares (cost $53,337 )		43,256
Quality Bond Fund II - Primary Shares (FQB)
253,223 shares (cost $2,724,855 )		2,836,096
Equity-Income Portfolio - Initial Class (FEIP)
5,267,390 shares (cost $115,489,367 )		88,544,822
High Income Portfolio - Initial Class (FHIP)
1,920,203 shares (cost $10,979,997 )		10,157,875
VIP Fund - Asset Manager Portfolio - Initial Class (FAMP)
2,640,245 shares (cost $36,389,384 )		34,323,186
VIP Fund - Contrafund Portfolio - Initial Class (FCP)
4,754,847 shares (cost $118,767,769 )		98,044,946
VIP Fund - Energy Portfolio - Service Class 2 (FNRS2)
96,046 shares (cost $1,992,103 )		1,612,618
VIP Fund - Equity-Income Portfolio - Service Class (FEIS)
191,862 shares (cost $4,050,091 )		3,213,690
VIP Fund - Freedom Fund 2010 Portfolio - Service Class (FF10S)
37,516 shares (cost $409,806 )		366,528
VIP Fund - Freedom Fund 2020 Portfolio - Service Class (FF20S)
125,838 shares (cost $1,310,190 )		1,195,460
VIP Fund - Freedom Fund 2030 Portfolio - Service Class (FF30S)
122,849 shares (cost $1,345,068 )		1,108,098
VIP Fund - Growth Portfolio - Initial Class (FGP)
3,649,738 shares (cost $118,187,554 )		109,638,139
VIP Fund - Growth Portfolio - Service Class (FGS)
61,884 shares (cost $2,068,332 )		1,854,039
VIP Fund - High Income Portfolio - Initial Class R (FHIPR)
773,865 shares (cost $3,806,171 )		4,078,270
VIP Fund - Investment Grade Bond Portfolio - Initial Class (FIGBP)
3,083,991 shares (cost $38,323,969 )		38,488,206
VIP Fund - Investment Grade Bond Portfolio - Service Class (FIGBS)
106,384 shares (cost $1,302,213 )		1,318,093
VIP Fund - Mid Cap Portfolio - Service Class (FMCS)
461,862 shares (cost $14,018,259 )		11,735,905
VIP Fund - Overseas Portfolio - Initial Class (FOP)
1,213,366 shares (cost $19,514,891 )		18,261,152

(Continued)

Nationwide Provident VLI Separate Account 1

STATEMENT OF ASSETS, LIABILITIES AND CONTRACT OWNERS’ EQUITY, continued

VIP Fund - Overseas Portfolio - Initial Class R (FOPR)
1,497,107 shares (cost $28,354,441 )	$	22,486,545
VIP Fund - Overseas Portfolio - Service Class (FOS)
5,345 shares (cost $105,465 )		80,124
VIP Fund - Overseas Portfolio - Service Class R (FOSR)
138,124 shares (cost $2,538,131 )		2,067,722
VIP Fund - Value Strategies Portfolio - Service Class (FVSS)
271,637 shares (cost $2,622,478 )		2,094,323
Franklin Rising Dividends Securities Fund - Class 1 (FTVRDI)
380,305 shares (cost $5,957,582 )		6,134,312
Franklin Small Cap Value Securities Fund - Class 1 (FTVSVI)
461,468 shares (cost $7,351,975 )		5,999,083
Templeton Developing Markets Securities Fund - Class 3 (FTVDM3)
283,260 shares (cost $3,048,456 )		2,756,122
Templeton Foreign Securities Fund - Class 1 (TIF)
105,041 shares (cost $1,592,277 )		1,436,958
Templeton Global Bond Securities Fund - Class 3 (FTVGI3)
119,814 shares (cost $2,026,981 )		2,076,371
VIP Founding Funds Allocation Fund - Class 2 (FTVFA2)
1,132 shares (cost $7,812 )		8,083
International Portfolio - S Class Shares (AMINS)
169 shares (cost $1,476 )		1,604
Mid-Cap Growth Portfolio - I Class Shares (AMCG)
7,454 shares (cost $122,103 )		158,316
Partners Portfolio- I Class Shares (AMTP)
359,862 shares (cost $2,808,772 )		3,530,246
Small-Cap Growth Portfolio - S Class Shares (AMFAS)
62,197 shares (cost $787,438 )		637,515
Socially Responsive Portfolio - I Class Shares (AMSRS)
54,779 shares (cost $769,961 )		662,823
Capital Appreciation Fund/VA - Non-Service Shares (OVGR)
98,442 shares (cost $3,726,707 )		3,636,445
Global Securities Fund/VA - Class 3 (OVGS3)
291,346 shares (cost $9,002,316 )		7,770,195
Global Securities Fund/VA - Non-Service Shares (OVGS)
63,939 shares (cost $1,968,964 )		1,694,395
High Income Fund/VA - Class 3 (OVHI3)
127,967 shares (cost $355,428 )		254,653

(Continued)

Nationwide Provident VLI Separate Account 1

STATEMENT OF ASSETS, LIABILITIES AND CONTRACT OWNERS’ EQUITY, continued

High Income Fund/VA - Non-Service Shares (OVHI)
61,028 shares (cost $196,511 )	$	120,836
Main Street Fund(R)/VA - Non-Service Shares (OVGI)
127,918 shares (cost $2,758,309 )		2,325,542
Main Street Small Cap Fund(R)/VA - Non-Service Shares (OVSC)
102,043 shares (cost $1,691,491 )		1,469,424
Foreign Bond Portfolio (Unhedged) - Administrative Class (PMVFBA)
8,391 shares (cost $93,070 )		89,285
Low Duration Portfolio - Administrative Class (PMVLDA)
13,660 shares (cost $140,209 )		138,104
Putnam VT Growth and Income Fund - IB Shares (PVGIB)
10,829 shares (cost $184,182 )		155,934
Putnam VT International Equity Fund - IB Shares (PVTIGB)
9,786 shares (cost $90,959 )		108,434
Putnam VT Voyager Fund - IB Shares (PVTVB)
34,196 shares (cost $997,276 )		1,107,948
Blue Chip Growth Portfolio - II (TRBCG2)
121,796 shares (cost $1,258,451 )		1,157,063
Equity Income Portfolio - II (TREI2)
106,782 shares (cost $2,210,227 )		1,880,423
Limited-Term Bond Portfolio - II (TRLT2)
223 shares (cost $1,118 )		1,120
Worldwide Insurance Trust - Worldwide Bond Fund - Class R1 (VWBFR)
421,219 shares (cost $4,870,292 )		4,949,320
Worldwide Insurance Trust - Worldwide Bond Fund - Initial Class (VWBF)
334,573 shares (cost $3,854,969 )		3,931,230
Worldwide Insurance Trust - Worldwide Emerging Markets Fund - Class R1 (VWEMR)
1,244,463 shares (cost $15,364,861 )		13,950,430
Worldwide Insurance Trust - Worldwide Emerging Markets Fund - Initial Class (VWEM)
1,520,928 shares (cost $22,691,471 )		17,064,809
Worldwide Insurance Trust - Worldwide Hard Assets Fund - Class R1 (VWHAR)
352,876 shares (cost $10,711,183 )		10,325,164
Worldwide Insurance Trust - Worldwide Hard Assets Fund - Initial Class (VWHA)
224,787 shares (cost $6,880,153 )		6,577,258
Vanguard(R) Variable Insurance Funds - Equity Income Portfolio (VVEI)
118,072 shares (cost $1,888,137 )		1,565,640
Vanguard(R) Variable Insurance Funds - High Yield Bond Portfolio (VVHYB)
141,090 shares (cost $1,034,598 )		1,052,532

(Continued)

Nationwide Provident VLI Separate Account 1

STATEMENT OF ASSETS, LIABILITIES AND CONTRACT OWNERS’ EQUITY, continued

Vanguard(R) Variable Insurance Funds - Mid-Cap Index Portfolio (VVMCI)
230,961 shares (cost $3,338,814 )	$	2,776,154
Vanguard(R) Variable Insurance Funds - Total Bond Market Index Portfolio (VVHGB)
103,399 shares (cost $1,172,036 )		1,217,001
Ivy Fund Variable Insurance Portfolios, Inc. - Asset Strategy (WRASP)
17,187 shares (cost $157,826 )		158,552
Advantage Funds Variable Trust - VT Discovery Fund (SVDF)
42,300 shares (cost $504,380 )		664,113
Advantage Funds Variable Trust - VT Opportunity Fund (SVOF)
36,598 shares (cost $421,235 )		549,339
Advantage Funds Variable Trust - VT Small Cap Growth Fund (WFVSCG)
6,892 shares (cost $42,523 )		43,767
Total Investments		1,250,194,692
Accounts Receivable - NVIT Investor Destinations Capital Appreciation Fund - Class II (NVDCA2)		55
Accounts Receivable - Worldwide Insurance Trust - Worldwide Real Estate Fund - Initial Class (obsolete) (VWRE)		10,738
Total Assets		1,250,205,485
Accounts Payable - International Portfolio - S Class Shares (AMINS)		146
Accounts Payable - Limited-Term Bond Portfolio - II (TRLT2)		1,120
Other Accounts Payable		321,153
	$	1,249,883,066
Contract Owners’ Equity:
Held for the benefit of contractholders		1,249,481,250
Attributable to Nationwide Life Insurance Company		401,816
Total Contract Owners’ Equity (note 7)	$	1,249,883,066

See accompanying notes to financial statements.

Nationwide Provident VLI Separate Account 1

STATEMENTS OF OPERATIONS

Year Ended December 31, 2009

Investment Activity:	Total			AASCO		MLVGA2		JABS		JACAS		JAGTS2		JAGTS		JARLCS
Reinvested dividends	$	20,797,464		-		4,425		61,764		458		-		-		1,022
Mortality and expense risk charges (note 5)		(7,495,561	)	(142,774	)	(906	)	(14,004	)	(23,631	)	(3,554	)	(843	)	(718	)
Net investment income (loss)		13,301,903		(142,774	)	3,519		47,760		(23,173	)	(3,554	)	(843	)	304
Realized gain (loss) on investments		(135,623,004	)	1,210,601		1,761		(109,280	)	(116,450	)	(67,970	)	(5,412	)	(80,408	)
Change in unrealized gain (loss) on investments		395,385,460		7,025,505		13,747		461,697		1,332,644		291,344		60,349		98,461
Net gain (loss) on investments		259,762,456		8,236,106		15,508		352,417		1,216,194		223,374		54,937		18,053
Reinvested capital gains		7,674,274		-		-		81,989		-		-		-		-
Net increase (decrease) in contract owners’ equity resulting from operations	$	280,738,633		8,093,332		19,027		482,166		1,193,021		219,820		54,094		18,357
Investment Activity:	JAIGS2			JAIGS		MIGIC		MVFIC		MSVFI		MSEM		MSVRE		NVAGF3
Reinvested dividends	$	25,056		9,343		4,073		31,483		95,178		32,375		85,150		3,808
Mortality and expense risk charges (note 5)		(40,961	)	(13,808	)	(3,996	)	(17,457	)	(7,432	)	(2,576	)	(11,160	)	(251	)
Net investment income (loss)		(15,905	)	(4,465	)	77		14,026		87,746		29,799		73,990		3,557
Realized gain (loss) on investments		(343,834	)	(254,219	)	(13,639	)	(298,643	)	(114,651	)	(74,569	)	(3,689,825	)	243
Change in unrealized gain (loss) on investments		3,374,396		1,367,096		208,642		766,668		118,518		146,549		3,857,897		(2,046	)
Net gain (loss) on investments		3,030,562		1,112,877		195,003		468,025		3,867		71,980		168,072		(1,803	)
Reinvested capital gains		169,512		66,740		-		-		-		-		-		514
Net increase (decrease) in contract owners’ equity resulting from operations	$	3,184,169		1,175,152		195,080		482,051		91,613		101,779		242,062		2,268

(Continued)

Nationwide Provident VLI Separate Account 1

STATEMENTS OF OPERATIONS, Continued

Year Ended December 31, 2009

Investment Activity:	NVAGF6			NVAMV1		GVAAA2		GVABD2		GVAGG2		GVAGR2		GVAGI2		HIBF
Reinvested dividends	$	3,108		34		146		1,116		-		-		-		62,811
Mortality and expense risk charges (note 5)		(108	)	(9	)	(1,329	)	(2,573	)	(5,336	)	(5,815	)	(983	)	(3,846	)
Net investment income (loss)		3,000		25		(1,183	)	(1,457	)	(5,336	)	(5,815	)	(983	)	58,965
Realized gain (loss) on investments		28		1		(22,429	)	(24,619	)	(49,490	)	(57,474	)	(4,552	)	(88,136	)
Change in unrealized gain (loss) on investments		(3,672	)	40		57,584		64,257		255,514		227,685		39,752		253,864
Net gain (loss) on investments		(3,644	)	41		35,155		39,638		206,024		170,211		35,200		165,728
Reinvested capital gains		420		208		4,690		107		58,102		97,769		3,420		-
Net increase (decrease) in contract owners’ equity resulting from operations	$	(224	)	274		38,662		38,288		258,790		262,165		37,637		224,693
Investment Activity:	HIBF3			GEM		GEM3		GVGU1		GVGU		NVIE6		NVNMO1		NVNSR2
Reinvested dividends	$	113,961		15,834		41,112		15,517		41,294		686		11,405		48
Mortality and expense risk charges (note 5)		(8,034	)	(7,654	)	(23,298	)	(2,413	)	(7,393	)	(1,749	)	(39,944	)	(84	)
Net investment income (loss)		105,927		8,180		17,814		13,104		33,901		(1,063	)	(28,539	)	(36	)
Realized gain (loss) on investments		(97,762	)	(627,980	)	(844,120	)	(48,029	)	(362,459	)	5,666		90,436		(1,598	)
Change in unrealized gain (loss) on investments		405,467		1,183,213		2,368,115		60,769		394,251		67,032		1,704,468		4,372
Net gain (loss) on investments		307,705		555,233		1,523,995		12,740		31,792		72,698		1,794,904		2,774
Reinvested capital gains		-		-		-		-		-		-		36,090		-
Net increase (decrease) in contract owners’ equity resulting from operations	$	413,632		563,413		1,541,809		25,844		65,693		71,635		1,802,455		2,738

(Continued)

Nationwide Provident VLI Separate Account 1

STATEMENTS OF OPERATIONS, Continued

Year Ended December 31, 2009

Investment Activity:	NVCRA1			NVCRB1		NVCCA1		NVCCN1		NVCMD1		NVCMA1		NVCMC1		NVCBD1
Reinvested dividends	$	2,388		88		2,233		292		4,537		3,717		68		3,960
Mortality and expense risk charges (note 5)		(1,783	)	(12	)	(469	)	(86	)	(1,512	)	(786	)	(23	)	(928	)
Net investment income (loss)		605		76		1,764		206		3,025		2,931		45		3,032
Realized gain (loss) on investments		(32,153	)	36		(2,250	)	34		9,664		(2,994	)	(730	)	160
Change in unrealized gain (loss) on investments		90,503		245		14,233		1,108		29,101		17,816		1,130		5,197
Net gain (loss) on investments		58,350		281		11,983		1,142		38,765		14,822		400		5,357
Reinvested capital gains		65		-		-		23		16		210		2		807
Net increase (decrease) in contract owners’ equity resulting from operations	$	59,020		357		13,747		1,371		41,806		17,963		447		9,196
Investment Activity:	NVLCP1			TRF4		GVGF1		GVGFS		GBF		GBF4		CAF4		GVGH1
Reinvested dividends	$	1,015		1,126,820		1,849		3,475		20,800		850,640		91,538		988
Mortality and expense risk charges (note 5)		(224	)	(492,066	)	(1,013	)	(2,117	)	(4,725	)	(158,494	)	(111,198	)	(2,359	)
Net investment income (loss)		791		634,754		836		1,358		16,075		692,146		(19,660	)	(1,371	)
Realized gain (loss) on investments		925		(11,493,103	)	(117,925	)	(225,231	)	16,447		29,056		294,881		(46,465	)
Change in unrealized gain (loss) on investments		1,977		30,194,377		168,928		321,282		(28,991	)	(562,553	)	4,502,301		110,467
Net gain (loss) on investments		2,902		18,701,274		51,003		96,051		(12,544	)	(533,497	)	4,797,182		64,002
Reinvested capital gains		452		-		-		-		7,927		351,365		-		-
Net increase (decrease) in contract owners’ equity resulting from operations	$	4,145		19,336,028		51,839		97,409		11,458		510,014		4,777,522		62,631

(Continued)

Nationwide Provident VLI Separate Account 1

STATEMENTS OF OPERATIONS, Continued

Year Ended December 31, 2009

Investment Activity:	GVGHS			GVIDA		NVDCA2		GVIDC		GVIDM		GVDMA		GVDMC		MCIF
Reinvested dividends	$	1,290		42,234		7		31,547		482,593		275,329		29,372		27,085
Mortality and expense risk charges (note 5)		(3,363	)	(28,784	)	(1	)	(10,310	)	(213,243	)	(152,784	)	(11,863	)	(19,717	)
Net investment income (loss)		(2,073	)	13,450		6		21,237		269,350		122,545		17,509		7,368
Realized gain (loss) on investments		(50,634	)	(683,623	)	-		58,322		(1,395,314	)	(1,090,842	)	(192,541	)	(234,063	)
Change in unrealized gain (loss) on investments		134,961		1,400,249		(5	)	75,132		7,454,685		4,639,507		355,536		1,026,845
Net gain (loss) on investments		84,327		716,626		(5	)	133,454		6,059,371		3,548,665		162,995		792,782
Reinvested capital gains		-		224,649		5		7,516		912,831		929,600		24,692		88,560
Net increase (decrease) in contract owners’ equity resulting from operations	$	82,254		954,725		6		162,207		7,241,552		4,600,810		205,196		888,710
Investment Activity:	NVMIG3			GVDIV3		GVDIV4		NVMLG1		NVMLV1		NVMMG1		NVMMV2		SCGF
Reinvested dividends	$	5,590		333,533		407,954		5,325		7,848		-		23,705		-
Mortality and expense risk charges (note 5)		(4,696	)	(103,411	)	(124,319	)	(4,456	)	(4,049	)	(190,095	)	(14,394	)	(9,363	)
Net investment income (loss)		894		230,122		283,635		869		3,799		(190,095	)	9,311		(9,363	)
Realized gain (loss) on investments		18,811		(2,455,851	)	(1,571,735	)	26,154		16,096		545,719		36,581		(230,192	)
Change in unrealized gain (loss) on investments		200,430		6,337,362		6,308,976		170,522		131,173		8,726,883		536,262		577,555
Net gain (loss) on investments		219,241		3,881,511		4,737,241		196,676		147,269		9,272,602		572,843		347,363
Reinvested capital gains		-		-		-		-		-		-		-		-
Net increase (decrease) in contract owners’ equity resulting from operations	$	220,135		4,111,633		5,020,876		197,545		151,068		9,082,507		582,154		338,000

(Continued)

Nationwide Provident VLI Separate Account 1

STATEMENTS OF OPERATIONS, Continued

Year Ended December 31, 2009

Investment Activity:	SCVF4			SCF4		MSBF		GVEX4		NVSTB2		GGTC		GGTC3		GVUG1
Reinvested dividends	$	96,848		44,663		137,440		2,552,979		14,671		-		-		-
Mortality and expense risk charges (note 5)		(112,683	)	(110,756	)	(9,772	)	(753,618	)	(3,602	)	(1,126	)	(2,619	)	(8,767	)
Net investment income (loss)		(15,835	)	(66,093	)	127,668		1,799,361		11,069		(1,126	)	(2,619	)	(8,767	)
Realized gain (loss) on investments		(1,576,665	)	(3,117,703	)	(96,278	)	(9,562,959	)	1,733		(80,340	)	(82,980	)	(319,654	)
Change in unrealized gain (loss) on investments		5,419,229		8,054,232		269,870		34,187,584		(5,654	)	156,789		240,243		601,860
Net gain (loss) on investments		3,842,564		4,936,529		173,592		24,624,625		(3,921	)	76,449		157,263		282,206
Reinvested capital gains		-		-		-		-		4,046		-		-		-
Net increase (decrease) in contract owners’ equity resulting from operations	$	3,826,729		4,870,436		301,260		26,423,986		11,194		75,323		154,644		273,439
Investment Activity:	NVOLG1			NVTIV3		EIF4		NVRE1		SAM4		AMTB		AVBVI		AVCA
Reinvested dividends	$	89		35		171,230		22,141		58,768		833,535		3,564		1,434
Mortality and expense risk charges (note 5)		(139	)	(27	)	(103,885	)	(7,049	)	(402,586	)	(72,487	)	(6,441	)	(1,634	)
Net investment income (loss)		(50	)	8		67,345		15,092		(343,818	)	761,048		(2,877	)	(200	)
Realized gain (loss) on investments		283		24		(679,666	)	24,190		-		(398,907	)	(1,346,721	)	(24,362	)
Change in unrealized gain (loss) on investments		6,877		255		4,406,436		375,834		-		906,313		1,763,205		68,844
Net gain (loss) on investments		7,160		279		3,726,770		400,024		-		507,406		416,484		44,482
Reinvested capital gains		1,382		19		-		8,844		-		-		-		-
Net increase (decrease) in contract owners’ equity resulting from operations	$	8,492		306		3,794,115		423,960		(343,818	)	1,268,454		413,607		44,282

(Continued)

Nationwide Provident VLI Separate Account 1

STATEMENTS OF OPERATIONS, Continued

Year Ended December 31, 2009

Investment Activity:	AVCDI			ALVGIA		ALVSVA		ACVIG		ACVIP2		ACVI		ACVI3		ACVMV1
Reinvested dividends	$	-		74,779		23,812		50,386		45,850		10,085		30,026		23,591
Mortality and expense risk charges (note 5)		(7,800	)	(13,051	)	(15,409	)	(7,666	)	(17,880	)	(2,737	)	(5,847	)	(4,454	)
Net investment income (loss)		(7,800	)	61,728		8,403		42,720		27,970		7,348		24,179		19,137
Realized gain (loss) on investments		(102,556	)	(696,679	)	(505,751	)	(73,437	)	13,323		(92,486	)	(565,893	)	(95,666	)
Change in unrealized gain (loss) on investments		492,913		958,012		1,172,473		213,688		192,445		206,317		782,670		269,563
Net gain (loss) on investments		390,357		261,333		666,722		140,251		205,768		113,831		216,777		173,897
Reinvested capital gains		-		-		92,924		-		-		-		-		-
Net increase (decrease) in contract owners’ equity resulting from operations	$	382,557		323,061		768,049		182,971		233,738		121,179		240,956		193,034
Investment Activity:	ACVU1			ACVV		ACVVS1		DVSCS		DSIF		DCAP		DSC		FVCA2P
Reinvested dividends	$	4,210		295,637		-		113,823		130,003		63,693		1,670		686
Mortality and expense risk charges (note 5)		(6,272	)	(36,295	)	(1,499	)	(33,466	)	(45,086	)	(17,257	)	(744	)	(640	)
Net investment income (loss)		(2,062	)	259,342		(1,499	)	80,357		84,917		46,436		926		46
Realized gain (loss) on investments		(645,934	)	(949,971	)	(253,495	)	(910,754	)	(529,386	)	(219,617	)	(19,777	)	(2,165	)
Change in unrealized gain (loss) on investments		873,857		1,607,909		284,844		1,155,293		1,521,743		475,477		43,878		16,381
Net gain (loss) on investments		227,923		657,938		31,349		244,539		992,357		255,860		24,101		14,216
Reinvested capital gains		-		-		-		771,583		389,701		185,853		-		-
Net increase (decrease) in contract owners’ equity resulting from operations	$	225,861		917,280		29,850		1,096,479		1,466,975		488,149		25,027		14,262

(Continued)

Nationwide Provident VLI Separate Account 1

STATEMENTS OF OPERATIONS, Continued

Year Ended December 31, 2009

Investment Activity:	FALF			FQB		FEIP		FHIP		FAMP		FCP		FNRS2		FEIS
Reinvested dividends	$	1,361		153,817		1,774,362		732,670		739,802		1,188,481		3,178		63,251
Mortality and expense risk charges (note 5)		(348	)	(16,956	)	(524,280	)	(62,517	)	(201,008	)	(576,050	)	(9,008	)	(20,981	)
Net investment income (loss)		1,013		136,861		1,250,082		670,153		538,794		612,431		(5,830	)	42,270
Realized gain (loss) on investments		(33,183	)	(58,006	)	(10,496,496	)	(1,103,577	)	(1,151,758	)	(6,035,738	)	(204,812	)	(344,075	)
Change in unrealized gain (loss) on investments		38,862		337,173		30,301,306		3,831,137		8,351,694		31,742,822		692,375		1,087,296
Net gain (loss) on investments		5,679		279,167		19,804,810		2,727,560		7,199,936		25,707,084		487,563		743,221
Reinvested capital gains		-		-		-		-		51,865		23,593		-		-
Net increase (decrease) in contract owners’ equity resulting from operations	$	6,692		416,028		21,054,892		3,397,713		7,790,595		26,343,108		481,733		785,491
Investment Activity:	FF10S			FF20S		FF30S		FGP		FGS		FHIPR		FIGBP		FIGBS
Reinvested dividends	$	12,984		37,557		20,798		432,702		5,790		297,684		3,232,787		105,562
Mortality and expense risk charges (note 5)		(2,291	)	(5,849	)	(6,280	)	(655,292	)	(12,901	)	(25,880	)	(251,213	)	(9,077	)
Net investment income (loss)		10,693		31,708		14,518		(222,590	)	(7,111	)	271,804		2,981,574		96,485
Realized gain (loss) on investments		(21,516	)	(76,593	)	(57,513	)	(16,744,109	)	(88,640	)	(296,373	)	(563,041	)	(10,371	)
Change in unrealized gain (loss) on investments		80,817		241,720		271,767		41,479,823		540,361		1,321,978		2,509,871		74,819
Net gain (loss) on investments		59,301		165,127		214,254		24,735,714		451,721		1,025,605		1,946,830		64,448
Reinvested capital gains		2,611		11,694		11,972		85,351		1,501		-		145,038		4,883
Net increase (decrease) in contract owners’ equity resulting from operations	$	72,605		208,529		240,744		24,598,475		446,111		1,297,409		5,073,442		165,816

(Continued)

Nationwide Provident VLI Separate Account 1

STATEMENTS OF OPERATIONS, Continued

Year Ended December 31, 2009

Investment Activity:	FMCS			FOP		FOPR		FOS		FOSR		FVSS		FTVRDI		FTVSVI
Reinvested dividends	$	60,984		347,501		425,557		1,458		38,226		8,951		93,324		107,538
Mortality and expense risk charges (note 5)		(71,146	)	(109,238	)	(129,732	)	(581	)	(12,894	)	(10,668	)	(37,692	)	(37,074	)
Net investment income (loss)		(10,162	)	238,263		295,825		877		25,332		(1,717	)	55,632		70,464
Realized gain (loss) on investments		(1,071,368	)	(242,604	)	(941,040	)	(7,967	)	(143,550	)	(450,832	)	(1,942,531	)	(564,534	)
Change in unrealized gain (loss) on investments		4,391,584		3,884,106		5,204,616		23,490		546,977		1,138,724		2,644,667		1,638,428
Net gain (loss) on investments		3,320,216		3,641,502		4,263,576		15,523		403,427		687,892		702,136		1,073,894
Reinvested capital gains		53,385		54,316		61,996		252		5,594		-		-		249,715
Net increase (decrease) in contract owners’ equity resulting from operations	$	3,363,439		3,934,081		4,621,397		16,652		434,353		686,175		757,768		1,394,073
Investment Activity:	FTVDM3			TIF		FTVGI3		FTVFA2		AMINS		AMCG		AMTP		AMRS
Reinvested dividends	$	72,043		43,511		277,815		186		50		-		79,761		-
Mortality and expense risk charges (note 5)		(12,203	)	(7,685	)	(13,474	)	(16	)	(1,605	)	(4,675	)	(71,711	)	(693	)
Net investment income (loss)		59,840		35,826		264,341		170		(1,555	)	(4,675	)	8,050		(693	)
Realized gain (loss) on investments		(382,300	)	(54,880	)	39,365		(8	)	(280,140	)	(440,030	)	(10,537,066	)	(78,573	)
Change in unrealized gain (loss) on investments		1,233,133		362,182		11,638		426		348,993		602,613		15,991,938		123,212
Net gain (loss) on investments		850,833		307,302		51,003		418		68,853		162,583		5,454,872		44,639
Reinvested capital gains		6,753		48,680		-		-		-		-		354,306		-
Net increase (decrease) in contract owners’ equity resulting from operations	$	917,426		391,808		315,344		588		67,298		157,908		5,817,228		43,946

(Continued)

Nationwide Provident VLI Separate Account 1

STATEMENTS OF OPERATIONS, Continued

Year Ended December 31, 2009

Investment Activity:	AMFAS			AMSRS		OVGR		OVGS3		OVGS		OVHI3		OVHI		OVGI
Reinvested dividends	$	-		13,968		11,498		153,421		37,117		-		-		39,759
Mortality and expense risk charges (note 5)		(4,103	)	(4,364	)	(25,165	)	(49,867	)	(9,978	)	(1,422	)	(922	)	(15,040	)
Net investment income (loss)		(4,103	)	9,604		(13,667	)	103,554		27,139		(1,422	)	(922	)	24,719
Realized gain (loss) on investments		(99,859	)	(165,751	)	(158,759	)	(582,246	)	(151,404	)	(152,217	)	(383,066	)	(161,691	)
Change in unrealized gain (loss) on investments		225,585		311,912		1,454,538		2,635,266		583,615		201,130		415,214		653,458
Net gain (loss) on investments		125,726		146,161		1,295,779		2,053,020		432,211		48,913		32,148		491,767
Reinvested capital gains		-		-		-		146,585		35,390		-		-		-
Net increase (decrease) in contract owners’ equity resulting from operations	$	121,623		155,765		1,282,112		2,303,159		494,740		47,491		31,226		516,486
Investment Activity:	OVSC			PMVFBA		PMVLDA		PVGIB		PVTIGB		PVTVB		TRBCG2		TREI2
Reinvested dividends	$	13,103		218		1,342		4,044		-		3,239		-		29,799
Mortality and expense risk charges (note 5)		(9,484	)	(99	)	(367	)	(1,073	)	(851	)	(3,557	)	(7,241	)	(12,304	)
Net investment income (loss)		3,619		119		975		2,971		(851	)	(318	)	(7,241	)	17,495
Realized gain (loss) on investments		(260,723	)	509		440		(133,664	)	(147,374	)	14,993		(152,789	)	(234,025	)
Change in unrealized gain (loss) on investments		692,310		(3,785	)	(2,105	)	162,404		162,646		232,435		506,172		632,712
Net gain (loss) on investments		431,587		(3,276	)	(1,665	)	28,740		15,272		247,428		353,383		398,687
Reinvested capital gains		-		980		5,353		-		-		-		-		-
Net increase (decrease) in contract owners’ equity resulting from operations	$	435,206		(2,177	)	4,663		31,711		14,421		247,110		346,142		416,182

(Continued)

Nationwide Provident VLI Separate Account 1

STATEMENTS OF OPERATIONS, Continued

Year Ended December 31, 2009

Investment Activity:	TRLT2			VWBFR		VWBF		VWEMR		VWEM		VWHAR		VWHA		VWRER
Reinvested dividends	$	24,319		178,492		156,064		17,316		22,521		19,549		15,613		-
Mortality and expense risk charges (note 5)		(5,034	)	(30,348	)	(26,027	)	(72,683	)	(85,424	)	(53,243	)	(38,099	)	(20,178	)
Net investment income (loss)		19,285		148,144		130,037		(55,367	)	(62,903	)	(33,694	)	(22,486	)	(20,178	)
Realized gain (loss) on investments		15,065		(34,784	)	(101,414	)	(3,842,379	)	(1,586,007	)	(559,243	)	295,457		(2,986,959	)
Change in unrealized gain (loss) on investments		30,188		88,366		169,592		11,037,270		10,502,504		4,074,484		2,353,093		4,155,367
Net gain (loss) on investments		45,253		53,582		68,178		7,194,891		8,916,497		3,515,241		2,648,550		1,168,408
Reinvested capital gains		-		-		-		700,045		910,472		38,766		30,961		-
Net increase (decrease) in contract owners’ equity resulting from operations	$	64,538		201,726		198,215		7,839,569		9,764,066		3,520,313		2,657,025		1,148,230
Investment Activity:	VVEI			VVHYB		VVMCI		VVHGB		WRASP		SVDF		SVOF		WFVSCG
Reinvested dividends	$	75,454		71,829		42,073		54,331		-		-		-		-
Mortality and expense risk charges (note 5)		(14,359	)	(8,559	)	(23,034	)	(11,453	)	(193	)	(28,529	)	(21,967	)	(76	)
Net investment income (loss)		61,095		63,270		19,039		42,878		(193	)	(28,529	)	(21,967	)	(76	)
Realized gain (loss) on investments		(231,423	)	(47,977	)	(392,407	)	10,513		268		(32,175	)	(2,677,913	)	709
Change in unrealized gain (loss) on investments		420,696		266,731		1,121,431		6,489		726		1,392,408		4,051,946		1,244
Net gain (loss) on investments		189,273		218,754		729,024		17,002		994		1,360,233		1,374,033		1,953
Reinvested capital gains		4,402		-		105,182		-		-		-		-		-
Net increase (decrease) in contract owners’ equity resulting from operations	$	254,770		282,024		853,245		59,880		801		1,331,704		1,352,066		1,877

(Continued)

Nationwide Provident VLI Separate Account 1

STATEMENTS OF OPERATIONS, Continued

Year Ended December 31, 2009

Investment Activity:	BF4			SGRF4		VWRE
Reinvested dividends	$	198,029		-		-
Mortality and expense risk charges (note 5)		(47,837	)	(70,289	)	(10,798	)
Net investment income (loss)		150,192		(70,289	)	(10,798	)
Realized gain (loss) on investments		(11,938,236	)	(4,726,698	)	(1,864,095	)
Change in unrealized gain (loss) on investments		11,216,817		6,214,892		2,500,409
Net gain (loss) on investments		(721,419	)	1,488,194		636,314
Reinvested capital gains		-		-		-
Net increase (decrease) in contract owners’ equity resulting from operations	$	(571,227	)	1,417,905		625,516

See accompanying notes to financial statements.

NATIONWIDE PROVIDENT VLI SEPARATE ACCOUNT-1

STATEMENTS OF CHANGES IN CONTRACT OWNERS’ EQUITY

Years Ended December 31, 2009 and 2008

	Total					AASCO				MLVGA2			JABS
	2009			2008		2009		2008		2009		2008	2009		2008
Investment activity:
Net investment income (loss)	$	13,301,903		17,634,990		(142,774	)	(196,036	)	3,519		-	47,760		29,710
Realized gain (loss) on investments		(135,623,004	)	(26,982,252	)	1,210,601		1,386,669		1,761		-	(109,280	)	5,853
Change in unrealized gain (loss) on investments		395,385,460		(795,706,832	)	7,025,505		(19,389,831	)	13,747		-	461,697		(434,540	)
Reinvested capital gains		7,674,274		102,151,999		-		410,734		-		-	81,989		106,636
Net increase (decrease) in contract owners’ equity resulting from operations		280,738,633		(702,902,095	)	8,093,332		(17,788,464	)	19,027		-	482,166		(292,341	)
Equity transactions:
Purchase payments received from contract owners		112,892,557		131,904,396		2,045,988		2,386,790		4,535		-	140,883		96,233
Transfers between funds (note 5)		(6,945,737	)	(4,136,328	)	(737,750	)	(628,704	)	421,060		-	752,735		801,526
Surrenders and Death Benefits (note 3 and note 5)		(122,458,444	)	(125,921,898	)	(2,312,850	)	(1,892,923	)	-		-	(100,288	)	(120,398	)
Net policy repayments (loans) (note 4)		(491,370	)	(4,431,138	)	(52,370	)	(87,836	)	-		-	2,249		(4,367	)
Redemptions to pay cost of insurance charges and administration charges (note 5)		(105,393,047	)	(110,307,235	)	(1,955,800	)	(2,104,362	)	(3,101	)	-	(132,983	)	(112,171	)
Adjustments to maintain reserves		(217,375	)	-		1,094		5,500		(20,896	)	-	488		(9,590	)
Net equity transactions		(122,613,416	)	(112,892,203	)	(3,011,688	)	(2,321,535	)	401,598		-	663,084		651,233
Net change in contract owners’ equity		158,125,217		(815,794,298	)	5,081,644		(20,109,999	)	420,625		-	1,145,250		358,892
Contract owners’ equity beginning of period		1,091,757,849		1,907,552,146		19,377,930		39,487,928		-		-	1,400,772		1,041,880
Contract owners’ equity end of period	$	1,249,883,066		1,091,757,848		24,459,574		19,377,930		420,625		-	2,546,022		1,400,772
CHANGES IN UNITS:
Beginning units		5,402,567		5,766,206		172,061		183,894		-		-	9,537		5,511
Units purchased		2,190,554		1,254,457		23,943		24,069		3,674		-	5,773		6,158
Units redeemed		(2,334,183	)	(1,618,101	)	(46,817	)	(35,902	)	(204	)	-	(3,170	)	(2,132	)
Ending units		5,258,938		5,402,562		149,187		172,061		3,470		-	12,140		9,537

(Continued)

NATIONWIDE PROVIDENT VLI SEPARATE ACCOUNT-1

STATEMENTS OF CHANGES IN CONTRACT OWNERS’ EQUITY, Continued

Years Ended December 31, 2009 and 2008

	JACAS					JAGTS2				JAGTS				JARLCS
	2009			2008		2009		2008		2009		2008		2009		2008
Investment activity:
Net investment income (loss)	$	(23,173	)	(27,116	)	(3,554	)	(3,443	)	(843	)	(1,086	)	304		(45	)
Realized gain (loss) on investments		(116,450	)	620,284		(67,970	)	18,601		(5,412	)	22,692		(80,408	)	(8,861	)
Change in unrealized gain (loss) on investments		1,332,644		(2,786,558	)	291,344		(299,699	)	60,349		(110,371	)	98,461		(93,444	)
Reinvested capital gains		-		-		-		-		-		-		-		12,384
Net increase (decrease) in contract owners’ equity resulting from operations		1,193,021		(2,193,390	)	219,820		(284,541	)	54,094		(88,765	)	18,357		(89,966	)
Equity transactions:
Purchase payments received from contract owners		459,837		483,860		51,619		67,600		250		1,322		12,699		25,088
Transfers between funds (note 5)		786,542		512,539		84,331		38,767		37,528		(6,166	)	(146,700	)	(3,990	)
Surrenders and Death Benefits (note 3 and note 5)		(194,938	)	(170,985	)	(36,447	)	(18,100	)	(10,488	)	(20,561	)	(1,322	)	(9,921	)
Net policy repayments (loans) (note 4)		(37,867	)	(132,607	)	(229	)	(77,721	)	693		(8,507	)	1,764		5,658
Redemptions to pay cost of insurance charges and administration charges (note 5)		(265,143	)	(268,053	)	(44,698	)	(36,010	)	(12,341	)	(16,145	)	(12,015	)	(15,859	)
Adjustments to maintain reserves		(856	)	203		(63	)	32		102		500		(386	)	37
Net equity transactions		747,575		424,957		54,513		(25,432	)	15,744		(49,557	)	(145,960	)	1,013
Net change in contract owners’ equity		1,940,596		(1,768,433	)	274,333		(309,973	)	69,838		(138,322	)	(127,603	)	(88,953	)
Contract owners’ equity beginning of period		2,421,640		4,190,073		383,220		693,193		100,116		238,438		154,480		243,433
Contract owners’ equity end of period	$	4,362,236		2,421,640		657,553		383,220		169,954		100,116		26,877		154,480
CHANGES IN UNITS:
Beginning units		19,072		17,297		4,559		4,592		1,026		1,416		1,151		1,135
Units purchased		11,302		11,970		2,202		1,797		77		69		180		223
Units redeemed		(6,126	)	(10,195	)	(1,748	)	(1,830	)	(306	)	(459	)	(1,312	)	(207	)
Ending units		24,248		19,072		5,013		4,559		797		1,026		19		1,151

(Continued)

NATIONWIDE PROVIDENT VLI SEPARATE ACCOUNT-1

STATEMENTS OF CHANGES IN CONTRACT OWNERS’ EQUITY, Continued

Years Ended December 31, 2009 and 2008

	JAIGS2					JAIGS				MIGIC				MVFIC
	2009			2008		2009		2008		2009		2008		2009		2008
Investment activity:
Net investment income (loss)	$	(15,905	)	145,110		(4,465	)	65,376		77		(797	)	14,026		21,151
Realized gain (loss) on investments		(343,834	)	95,209		(254,219	)	245,232		(13,639	)	2,395		(298,643	)	12,775
Change in unrealized gain (loss) on investments		3,374,396		(6,011,270	)	1,367,096		(2,737,072	)	208,642		(349,801	)	766,668		(1,552,681	)
Reinvested capital gains		169,512		1,025,154		66,740		456,694		-		34,629		-		153,005
Net increase (decrease) in contract owners’ equity resulting from operations		3,184,169		(4,745,797	)	1,175,152		(1,969,770	)	195,080		(313,574	)	482,051		(1,365,750	)
Equity transactions:
Purchase payments received from contract owners		354,975		442,035		66,756		67,393		71,657		74,378		260,821		284,947
Transfers between funds (note 5)		746,427		2,490,336		122,933		(143,825	)	102,510		(10,388	)	79,430		(146,434	)
Surrenders and Death Benefits (note 3 and note 5)		(253,857	)	(255,772	)	(159,923	)	(145,044	)	(35,289	)	(44,145	)	(202,650	)	(287,527	)
Net policy repayments (loans) (note 4)		(36,434	)	(14,941	)	(63,683	)	6,227		(56,571	)	(1,087	)	(43,134	)	3,136
Redemptions to pay cost of insurance charges and administration charges (note 5)		(416,650	)	(359,501	)	(131,562	)	(138,498	)	(60,383	)	(60,647	)	(221,802	)	(247,730	)
Adjustments to maintain reserves		(286	)	87		712		2,000		(711	)	(18	)	(609	)	(100	)
Net equity transactions		394,175		2,302,244		(164,767	)	(351,747	)	21,213		(41,907	)	(127,944	)	(393,708	)
Net change in contract owners’ equity		3,578,344		(2,443,553	)	1,010,385		(2,321,517	)	216,293		(355,481	)	354,107		(1,759,458	)
Contract owners’ equity beginning of period		4,290,800		6,734,353		1,634,805		3,956,322		507,212		862,693		2,559,029		4,318,487
Contract owners’ equity end of period	$	7,869,144		4,290,800		2,645,190		1,634,805		723,505		507,212		2,913,136		2,559,029
CHANGES IN UNITS:
Beginning units		32,523		24,230		4,620		5,892		4,507		4,862		16,210		18,297
Units purchased		8,668		16,107		531		409		1,339		686		5,629		4,981
Units redeemed		(7,654	)	(7,814	)	(1,341	)	(1,681	)	(1,375	)	(1,041	)	(6,705	)	(7,068	)
Ending units		33,537		32,523		3,810		4,620		4,471		4,507		15,134		16,210

(Continued)

NATIONWIDE PROVIDENT VLI SEPARATE ACCOUNT-1

STATEMENTS OF CHANGES IN CONTRACT OWNERS’ EQUITY, Continued

Years Ended December 31, 2009 and 2008

	MSVFI					MSEM				MSVRE				NVAGF3
	2009			2008		2009		2008		2009		2008		2009		2008
Investment activity:
Net investment income (loss)	$	87,746		57,481		29,799		28,562		73,990		124,166		3,557		-
Realized gain (loss) on investments		(114,651	)	(31,496	)	(74,569	)	(17,578	)	(3,689,825	)	(784,617	)	243		-
Change in unrealized gain (loss) on investments		118,518		(198,270	)	146,549		(92,577	)	3,857,897		(2,946,056	)	(2,046	)	-
Reinvested capital gains		-		-		-		17,964		-		1,711,308		514		-
Net increase (decrease) in contract owners’ equity resulting from operations		91,613		(172,285	)	101,779		(63,629	)	242,062		(1,895,199	)	2,268		-
Equity transactions:
Purchase payments received from contract owners		88,333		100,316		28,743		7,506		201,868		430,981		3,662		-
Transfers between funds (note 5)		(438,435	)	(33,685	)	(40,717	)	(22,790	)	(2,411,260	)	(836,022	)	116,449		-
Surrenders and Death Benefits (note 3 and note 5)		(139,519	)	(40,952	)	(43,632	)	(2,641	)	(152,682	)	(327,661	)	-		-
Net policy repayments (loans) (note 4)		(31,345	)	(23,553	)	10		1,467		4,625		(32,668	)	-		-
Redemptions to pay cost of insurance charges and administration charges (note 5)		(98,525	)	(85,675	)	(26,802	)	(22,410	)	(190,982	)	(334,850	)	(2,437	)	-
Adjustments to maintain reserves		434		100		434		9		(34	)	(202	)	(49	)	-
Net equity transactions		(619,057	)	(83,449	)	(81,964	)	(38,859	)	(2,548,465	)	(1,100,422	)	117,625		-
Net change in contract owners’ equity		(527,444	)	(255,734	)	19,815		(102,488	)	(2,306,403	)	(2,995,621	)	119,893		-
Contract owners’ equity beginning of period		1,308,776		1,564,510		365,135		467,623		2,819,856		5,815,477		-		-
Contract owners’ equity end of period	$	781,332		1,308,776		384,950		365,135		513,453		2,819,856		119,893		-
CHANGES IN UNITS:
Beginning units		9,326		9,965		1,163		1,307		17,854		23,396		-		-
Units purchased		1,438		2,081		147		109		2,686		3,562		1,082		-
Units redeemed		(4,962	)	(2,720	)	(401	)	(253	)	(20,011	)	(9,104	)	(27	)	-
Ending units		5,802		9,326		909		1,163		529		17,854		1,055		-

(Continued)

NATIONWIDE PROVIDENT VLI SEPARATE ACCOUNT-1

STATEMENTS OF CHANGES IN CONTRACT OWNERS’ EQUITY, Continued

Years Ended December 31, 2009 and 2008

	NVAGF6				NVAMV1			GVAAA2				GVABD2
	2009			2008	2009		2008	2009		2008		2009		2008
Investment activity:
Net investment income (loss)	$	3,000		-	25		-	(1,183	)	3,937		(1,457	)	14,355
Realized gain (loss) on investments		28		-	1		-	(22,429	)	(6,034	)	(24,619	)	(12,477	)
Change in unrealized gain (loss) on investments		(3,672	)	-	40		-	57,584		(51,473	)	64,257		(35,929	)
Reinvested capital gains		420		-	208		-	4,690		1,910		107		221
Net increase (decrease) in contract owners’ equity resulting from operations		(224	)	-	274		-	38,662		(51,660	)	38,288		(33,830	)
Equity transactions:
Purchase payments received from contract owners		2,778		-	-		-	24,599		15,060		36,249		26,397
Transfers between funds (note 5)		46,136		-	13,967		-	30,122		97,211		104,390		89,264
Surrenders and Death Benefits (note 3 and note 5)		-		-	-		-	(5,491	)	(3,321	)	(25,509	)	(60,441	)
Net policy repayments (loans) (note 4)		-		-	-		-	-		-		(2,554	)	(575	)
Redemptions to pay cost of insurance charges and administration charges (note 5)		(126	)	-	(18	)	-	(9,375	)	(12,448	)	(94,952	)	(47,669	)
Adjustments to maintain reserves		46,296		-	34		-	(24	)	1		(10	)	5
Net equity transactions		95,084		-	13,983		-	39,831		96,503		17,614		6,981
Net change in contract owners’ equity		94,860		-	14,257		-	78,493		44,843		55,902		(26,849	)
Contract owners’ equity beginning of period		-		-	-		-	160,345		115,502		284,015		310,864
Contract owners’ equity end of period	$	94,860		-	14,257		-	238,838		160,345		339,917		284,015
CHANGES IN UNITS:
Beginning units		-		-	-		-	2,079		1,044		2,962		2,900
Units purchased		88		-	114		-	1,106		1,582		1,616		1,297
Units redeemed		(1	)	-	-		-	(657	)	(547	)	(1,393	)	(1,235	)
Ending units		87		-	114		-	2,528		2,079		3,185		2,962

(Continued)

NATIONWIDE PROVIDENT VLI SEPARATE ACCOUNT-1

STATEMENTS OF CHANGES IN CONTRACT OWNERS’ EQUITY, Continued

Years Ended December 31, 2009 and 2008

	GVAGG2					GVAGR2				GVAGI2				HIBF
	2009			2008		2009		2008		2009		2008		2009		2008
Investment activity:
Net investment income (loss)	$	(5,336	)	12,617		(5,815	)	11,272		(983	)	1,893		58,965		43,645
Realized gain (loss) on investments		(49,490	)	(8,300	)	(57,474	)	(2,278	)	(4,552	)	(16,612	)	(88,136	)	(62,149	)
Change in unrealized gain (loss) on investments		255,514		(287,272	)	227,685		(418,789	)	39,752		(44,527	)	253,864		(140,211	)
Reinvested capital gains		58,102		19,481		97,769		44,097		3,420		37		-		-
Net increase (decrease) in contract owners’ equity resulting from operations		258,790		(263,474	)	262,165		(365,698	)	37,637		(59,209	)	224,693		(158,715	)
Equity transactions:
Purchase payments received from contract owners		144,492		102,364		108,301		88,725		20,225		10,916		28,813		7,793
Transfers between funds (note 5)		205,741		285,663		150,316		629,421		67,313		69,553		325,144		(1,576	)
Surrenders and Death Benefits (note 3 and note 5)		(21,888	)	(51,939	)	(37,675	)	(10,082	)	(672	)	-		(23,862	)	(78,874	)
Net policy repayments (loans) (note 4)		1,692		(7,162	)	2,289		(7,709	)	(4	)	-		425		1,008
Redemptions to pay cost of insurance charges and administration charges (note 5)		(66,265	)	(42,379	)	(48,542	)	(38,603	)	(7,558	)	(4,465	)	(39,602	)	(69,125	)
Adjustments to maintain reserves		(18	)	14		21		17		(2	)	(4	)	278		(100	)
Net equity transactions		263,754		286,561		174,710		661,769		79,302		76,000		291,196		(140,874	)
Net change in contract owners’ equity		522,544		23,087		436,875		296,071		116,939		16,791		515,889		(299,589	)
Contract owners’ equity beginning of period		470,075		446,988		586,558		290,487		89,399		72,608		331,530		631,119
Contract owners’ equity end of period	$	992,619		470,075		1,023,433		586,558		206,338		89,399		847,419		331,530
CHANGES IN UNITS:
Beginning units		6,303		3,650		9,249		2,536		1,478		738		2,375		3,159
Units purchased		4,644		4,409		3,993		7,575		1,304		1,346		1,124		120
Units redeemed		(1,477	)	(1,756	)	(1,526	)	(862	)	(153	)	(606	)	(1,073	)	(904	)
Ending units		9,470		6,303		11,716		9,249		2,629		1,478		2,426		2,375

(Continued)

NATIONWIDE PROVIDENT VLI SEPARATE ACCOUNT-1

STATEMENTS OF CHANGES IN CONTRACT OWNERS’ EQUITY, Continued

Years Ended December 31, 2009 and 2008

	HIBF3					GEM				GEM3				GVGU1
	2009			2008		2009		2008		2009		2008		2009		2008
Investment activity:
Net investment income (loss)	$	105,927		79,047		8,180		9,269		17,814		24,154		13,104		15,107
Realized gain (loss) on investments		(97,762	)	(46,645	)	(627,980	)	234,260		(844,120	)	109,154		(48,029	)	(66,024	)
Change in unrealized gain (loss) on investments		405,467		(328,183	)	1,183,213		(2,124,703	)	2,368,115		(5,178,719	)	60,769		(216,694	)
Reinvested capital gains		-		-		-		384,738		-		1,097,188		-		7,566
Net increase (decrease) in contract owners’ equity resulting from operations		413,632		(295,781	)	563,413		(1,496,436	)	1,541,809		(3,948,223	)	25,844		(260,045	)
Equity transactions:
Purchase payments received from contract owners		165,835		143,469		48,047		51,208		547,036		529,859		8,075		14,260
Transfers between funds (note 5)		626,395		(27,797	)	145,436		245,580		(37,647	)	(10,174	)	24,568		(189,646	)
Surrenders and Death Benefits (note 3 and note 5)		(103,530	)	(60,100	)	(60,964	)	(421,913	)	(302,365	)	(263,391	)	(16,107	)	(7,721	)
Net policy repayments (loans) (note 4)		(7,273	)	(98,737	)	(12,545	)	364		(949	)	(40,451	)	(3,354	)	448
Redemptions to pay cost of insurance charges and administration charges (note 5)		(91,726	)	(66,922	)	(58,035	)	(68,499	)	(312,203	)	(384,644	)	(21,146	)	(22,521	)
Adjustments to maintain reserves		(257	)	326		256		(156	)	12,902		(481	)	482		-
Net equity transactions		589,444		(109,761	)	62,195		(193,416	)	(93,226	)	(169,282	)	(7,482	)	(205,180	)
Net change in contract owners’ equity		1,003,076		(405,542	)	625,608		(1,689,852	)	1,448,583		(4,117,505	)	18,362		(465,225	)
Contract owners’ equity beginning of period		714,145		1,119,687		924,864		2,614,716		2,801,405		6,918,910		411,232		876,457
Contract owners’ equity end of period	$	1,717,221		714,145		1,550,472		924,864		4,249,988		2,801,405		429,594		411,232
CHANGES IN UNITS:
Beginning units		8,474		9,487		2,027		2,485		21,925		22,669		734		1,139
Units purchased		9,245		2,009		260		1,434		5,626		7,011		29		38
Units redeemed		(3,674	)	(3,022	)	(468	)	(1,892	)	(7,686	)	(7,755	)	(118	)	(443	)
Ending units		14,045		8,474		1,819		2,027		19,865		21,925		645		734

(Continued)

NATIONWIDE PROVIDENT VLI SEPARATE ACCOUNT-1

STATEMENTS OF CHANGES IN CONTRACT OWNERS’ EQUITY, Continued

Years Ended December 31, 2009 and 2008

	GVGU					NVIE6				NVNMO1			NVNSR2
	2009			2008		2009		2008		2009		2008	2009		2008
Investment activity:
Net investment income (loss)	$	33,901		44,266		(1,063	)	323		(28,539	)	-	(36	)	9
Realized gain (loss) on investments		(362,459	)	(124,975	)	5,666		(1,461	)	90,436		-	(1,598	)	(176	)
Change in unrealized gain (loss) on investments		394,251		(674,687	)	67,032		(16,853	)	1,704,468		-	4,372		(1,286	)
Reinvested capital gains		-		23,076		-		5,517		36,090		-	-		-
Net increase (decrease) in contract owners’ equity resulting from operations		65,693		(732,320	)	71,635		(12,474	)	1,802,455		-	2,738		(1,453	)
Equity transactions:
Purchase payments received from contract owners		103,458		125,675		26,738		4,423		1,491,635		-	513		182
Transfers between funds (note 5)		(97,357	)	(128,032	)	415,377		45,999		14,505,588		-	7,469		9,922
Surrenders and Death Benefits (note 3 and note 5)		(143,112	)	(78,386	)	(25,551	)	-		(764,534	)	-	-		-
Net policy repayments (loans) (note 4)		6,565		(34,937	)	(1,823	)	-		10,725		-	(9	)	-
Redemptions to pay cost of insurance charges and administration charges (note 5)		(92,339	)	(118,212	)	(20,910	)	(1,260	)	(514,260	)	-	(1,348	)	(214	)
Adjustments to maintain reserves		(61	)	16		(52	)	(1	)	(79,381	)	-	(4	)	(1	)
Net equity transactions		(222,846	)	(233,876	)	393,779		49,161		14,649,773		-	6,621		9,889
Net change in contract owners’ equity		(157,153	)	(966,196	)	465,414		36,687		16,452,228		-	9,359		8,436
Contract owners’ equity beginning of period		1,229,538		2,195,734		36,687		-		-		-	8,436		-
Contract owners’ equity end of period	$	1,072,385		1,229,538		502,101		36,687		16,452,228		-	17,795		8,436
CHANGES IN UNITS:
Beginning units		8,429		10,028		669		-		-		-	137		-
Units purchased		2,194		2,353		8,986		692		178,527		-	164		141
Units redeemed		(3,765	)	(3,952	)	(2,528	)	(23	)	(16,352	)	-	(79	)	(4	)
Ending units		6,858		8,429		7,127		669		162,175		-	222		137

(Continued)

NATIONWIDE PROVIDENT VLI SEPARATE ACCOUNT-1

STATEMENTS OF CHANGES IN CONTRACT OWNERS’ EQUITY, Continued

Years Ended December 31, 2009 and 2008

	NVCRA1					NVCRB1				NVCCA1				NVCCN1
	2009			2008		2009		2008		2009		2008		2009		2008
Investment activity:
Net investment income (loss)	$	605		990		76		8		1,764		266		206		79
Realized gain (loss) on investments		(32,153	)	(2,120	)	36		1		(2,250	)	(143	)	34		34
Change in unrealized gain (loss) on investments		90,503		(41,023	)	245		34		14,233		(6,492	)	1,108		66
Reinvested capital gains		65		4,592		-		6		-		225		23		17
Net increase (decrease) in contract owners’ equity resulting from operations		59,020		(37,561	)	357		49		13,747		(6,144	)	1,371		196
Equity transactions:
Purchase payments received from contract owners		60,691		34,008		1,179		1,058		10,809		1,083		788		421
Transfers between funds (note 5)		18,068		221,983		5,595		81		266,405		29,207		-		15,816
Surrenders and Death Benefits (note 3 and note 5)		(11,539	)	-		-		-		(26,154	)	-		-		(3,025	)
Net policy repayments (loans) (note 4)		(18,615	)	-		-		-		-		-		-		-
Redemptions to pay cost of insurance charges and administration charges (note 5)		(24,230	)	(6,163	)	(597	)	(48	)	(5,164	)	(577	)	(536	)	(2,512	)
Adjustments to maintain reserves		11		(1	)	-		-		36		-		(47	)	-
Net equity transactions		24,386		249,827		6,177		1,091		245,932		29,713		205		10,700
Net change in contract owners’ equity		83,406		212,266		6,534		1,140		259,679		23,569		1,576		10,896
Contract owners’ equity beginning of period		212,266		-		1,140		-		23,569		-		10,896		-
Contract owners’ equity end of period	$	295,672		212,266		7,674		1,140		283,248		23,569		12,472		10,896
CHANGES IN UNITS:
Beginning units		3,325		-		14		-		326		-		120		-
Units purchased		1,491		3,418		74		15		3,225		334		8		181
Units redeemed		(1,207	)	(93	)	(7	)	(1	)	(373	)	(8	)	(6	)	(61	)
Ending units		3,609		3,325		81		14		3,178		326		122		120

(Continued)

NATIONWIDE PROVIDENT VLI SEPARATE ACCOUNT-1

STATEMENTS OF CHANGES IN CONTRACT OWNERS’ EQUITY, Continued

Years Ended December 31, 2009 and 2008

	NVCMD1					NVCMA1				NVCMC1				NVCBD1
	2009			2008		2009		2008		2009		2008		2009		2008
Investment activity:
Net investment income (loss)	$	3,025		482		2,931		274		45		57		3,032		3,052
Realized gain (loss) on investments		9,664		(77	)	(2,994	)	(283	)	(730	)	(213	)	160		(207	)
Change in unrealized gain (loss) on investments		29,101		(135	)	17,816		(7,471	)	1,130		(915	)	5,197		(2,618	)
Reinvested capital gains		16		539		210		264		2		15		807		-
Net increase (decrease) in contract owners’ equity resulting from operations		41,806		809		17,963		(7,216	)	447		(1,056	)	9,196		227
Equity transactions:
Purchase payments received from contract owners		28,783		876		33,606		6,376		1,733		1,587		11,050		7,753
Transfers between funds (note 5)		209,992		78,924		505,654		24,599		(2,409	)	6,548		1,014		189,375
Surrenders and Death Benefits (note 3 and note 5)		-		-		(71	)	-		-		-		(11,695	)	-
Net policy repayments (loans) (note 4)		-		-		-		-		-		-		-		-
Redemptions to pay cost of insurance charges and administration charges (note 5)		(11,213	)	(226	)	(12,403	)	(647	)	(1,501	)	(1,891	)	(17,918	)	(10,323	)
Adjustments to maintain reserves		3		-		9		(1	)	(51	)	(1	)	(6	)	(1	)
Net equity transactions		227,565		79,574		526,795		30,327		(2,228	)	6,243		(17,555	)	186,804
Net change in contract owners’ equity		269,371		80,383		544,758		23,111		(1,781	)	5,187		(8,359	)	187,031
Contract owners’ equity beginning of period		80,383		-		23,111		-		5,187		-		187,031		-
Contract owners’ equity end of period	$	349,754		80,383		567,869		23,111		3,406		5,187		178,672		187,031
CHANGES IN UNITS:
Beginning units		1,060		-		337		-		62		-		1,889		-
Units purchased		3,485		1,062		6,403		346		50		83		1,144		1,996
Units redeemed		(739	)	(2	)	(159	)	(9	)	(77	)	(21	)	(1,362	)	(107	)
Ending units		3,806		1,060		6,581		337		35		62		1,671		1,889

(Continued)

NATIONWIDE PROVIDENT VLI SEPARATE ACCOUNT-1

STATEMENTS OF CHANGES IN CONTRACT OWNERS’ EQUITY, Continued

Years Ended December 31, 2009 and 2008

	NVLCP1					TRF4				GVGF1				GVGFS
	2009			2008		2009		2008		2009		2008		2009		2008
Investment activity:
Net investment income (loss)	$	791		590		634,754		1,017,527		836		2,721		1,358		4,911
Realized gain (loss) on investments		925		(68	)	(11,493,103	)	(3,079,118	)	(117,925	)	(17,932	)	(225,231	)	(56,493	)
Change in unrealized gain (loss) on investments		1,977		139		30,194,377		(79,001,716	)	168,928		(116,620	)	321,282		(165,072	)
Reinvested capital gains		452		-		-		19,844,483		-		-		-		-
Net increase (decrease) in contract owners’ equity resulting from operations		4,145		661		19,336,028		(61,218,824	)	51,839		(131,831	)	97,409		(216,654	)
Equity transactions:
Purchase payments received from contract owners		6,096		4,248		5,481,302		6,484,143		3,427		3,426		43,127		43,118
Transfers between funds (note 5)		(20,895	)	42,177		(816,323	)	(2,234,272	)	(13,522	)	(2,175	)	12,798		94,214
Surrenders and Death Benefits (note 3 and note 5)		(39	)	-		(8,446,772	)	(8,767,335	)	(9,148	)	(2,756	)	(57,734	)	(30,667	)
Net policy repayments (loans) (note 4)		-		-		831,131		1,142,485		316		(3,200	)	(203	)	(969	)
Redemptions to pay cost of insurance charges and administration charges (note 5)		(6,939	)	(4,227	)	(6,033,441	)	(6,414,067	)	(11,490	)	(12,817	)	(27,507	)	(22,140	)
Adjustments to maintain reserves		(21	)	(1	)	83,656		4,000		(411	)	-		(79	)	-
Net equity transactions		(21,798	)	42,197		(8,900,447	)	(9,785,046	)	(30,828	)	(17,522	)	(29,598	)	83,556
Net change in contract owners’ equity		(17,653	)	42,858		10,435,581		(71,003,870	)	21,011		(149,353	)	67,811		(133,098	)
Contract owners’ equity beginning of period		42,858		-		82,221,897		153,225,767		143,147		292,500		271,329		404,427
Contract owners’ equity end of period	$	25,205		42,858		92,657,478		82,221,897		164,158		143,147		339,140		271,329
CHANGES IN UNITS:
Beginning units		433		-		134,973		149,511		1,077		1,185		3,336		2,656
Units purchased		108		477		25,083		18,312		105		23		2,496		1,489
Units redeemed		(321	)	(44	)	(39,727	)	(32,850	)	(218	)	(131	)	(2,650	)	(809	)
Ending units		220		433		120,329		134,973		964		1,077		3,182		3,336

(Continued)

NATIONWIDE PROVIDENT VLI SEPARATE ACCOUNT-1

STATEMENTS OF CHANGES IN CONTRACT OWNERS’ EQUITY, Continued

Years Ended December 31, 2009 and 2008

	GBF					GBF4				CAF4				GVGH1
	2009			2008		2009		2008		2009		2008		2009		2008
Investment activity:
Net investment income (loss)	$	16,075		27,043		692,146		930,472		(19,660	)	(91,040	)	(1,371	)	(1,723	)
Realized gain (loss) on investments		16,447		2,733		29,056		(218,199	)	294,881		715,758		(46,465	)	(2,128	)
Change in unrealized gain (loss) on investments		(28,991	)	19,299		(562,553	)	1,065,939		4,502,301		(11,049,216	)	110,467		(169,114	)
Reinvested capital gains		7,927		-		351,365		-		-		-		-		34,949
Net increase (decrease) in contract owners’ equity resulting from operations		11,458		49,075		510,014		1,778,212		4,777,522		(10,424,498	)	62,631		(138,016	)
Equity transactions:
Purchase payments received from contract owners		115,868		147,242		1,485,651		1,969,052		1,796,182		2,073,305		5,120		6,129
Transfers between funds (note 5)		(104,342	)	51,603		1,024,134		(740,383	)	(694,847	)	(455,297	)	(151,581	)	(59,292	)
Surrenders and Death Benefits (note 3 and note 5)		(105,878	)	(50,236	)	(2,239,897	)	(1,825,493	)	(1,346,806	)	(1,460,208	)	(3,679	)	(2,864	)
Net policy repayments (loans) (note 4)		13		(2,489	)	70,022		(116,063	)	(85,439	)	(115,633	)	21,820		20,935
Redemptions to pay cost of insurance charges and administration charges (note 5)		(110,986	)	(102,723	)	(1,864,606	)	(1,775,917	)	(1,609,761	)	(1,702,071	)	(13,874	)	(13,915	)
Adjustments to maintain reserves		(13	)	26		(20,383	)	(13,000	)	(7,995	)	(3,500	)	(296	)	32
Net equity transactions		(205,338	)	43,423		(1,545,079	)	(2,501,804	)	(1,948,666	)	(1,663,404	)	(142,490	)	(48,975	)
Net change in contract owners’ equity		(193,880	)	92,498		(1,035,065	)	(723,592	)	2,828,856		(12,087,902	)	(79,859	)	(186,991	)
Contract owners’ equity beginning of period		707,775		615,277		25,206,838		25,930,430		15,586,776		27,674,678		372,913		559,904
Contract owners’ equity end of period	$	513,895		707,775		24,171,773		25,206,838		18,415,632		15,586,776		293,054		372,913
CHANGES IN UNITS:
Beginning units		5,626		5,229		62,329		71,643		158,183		170,866		1,869		2,103
Units purchased		1,501		3,027		16,507		21,912		22,942		23,399		66		101
Units redeemed		(3,119	)	(2,630	)	(18,895	)	(31,226	)	(40,276	)	(36,082	)	(899	)	(335	)
Ending units		4,008		5,626		59,941		62,329		140,849		158,183		1,036		1,869

(Continued)

NATIONWIDE PROVIDENT VLI SEPARATE ACCOUNT-1

STATEMENTS OF CHANGES IN CONTRACT OWNERS’ EQUITY, Continued

Years Ended December 31, 2009 and 2008

	GVGHS					GVIDA				NVDCA2			GVIDC
	2009			2008		2009		2008		2009		2008	2009		2008
Investment activity:
Net investment income (loss)	$	(2,073	)	(2,335	)	13,450		73,935		6		-	21,237		23,465
Realized gain (loss) on investments		(50,634	)	(15,996	)	(683,623	)	(211,387	)	-		-	58,322		(102,642	)
Change in unrealized gain (loss) on investments		134,961		(198,067	)	1,400,249		(3,134,724	)	(5	)	-	75,132		31,709
Reinvested capital gains		-		47,706		224,649		942,417		5		-	7,516		15,572
Net increase (decrease) in contract owners’ equity resulting from operations		82,254		(168,692	)	954,725		(2,329,759	)	6		-	162,207		(31,896	)
Equity transactions:
Purchase payments received from contract owners		64,361		86,800		719,138		1,031,822		14		-	137,575		185,451
Transfers between funds (note 5)		(112,891	)	114,150		(85,751	)	194,047		1,030		-	811,948		1,180,355
Surrenders and Death Benefits (note 3 and note 5)		(32,360	)	(33,570	)	(286,030	)	(196,814	)	-		-	(436,859	)	(719,884	)
Net policy repayments (loans) (note 4)		(2,606	)	(16,000	)	(161,762	)	(50,577	)	-		-	(77,840	)	(32,527	)
Redemptions to pay cost of insurance charges and administration charges (note 5)		(55,022	)	(37,168	)	(418,996	)	(455,134	)	(12	)	-	(263,280	)	(142,615	)
Adjustments to maintain reserves		24		(26	)	97		447		55		-	338		(100	)
Net equity transactions		(138,494	)	114,186		(233,304	)	523,791		1,087		-	171,882		470,680
Net change in contract owners’ equity		(56,240	)	(54,506	)	721,421		(1,805,968	)	1,093		-	334,089		438,784
Contract owners’ equity beginning of period		499,743		554,249		3,890,635		5,696,603		-		-	956,376		517,592
Contract owners’ equity end of period	$	443,503		499,743		4,612,056		3,890,635		1,093		-	1,290,465		956,376
CHANGES IN UNITS:
Beginning units		5,513		4,539		32,813		30,001		-		-	8,067		3,953
Units purchased		1,125		2,219		7,102		11,114		9		-	11,380		14,575
Units redeemed		(2,502	)	(1,245	)	(9,088	)	(8,302	)	-		-	(9,335	)	(10,461	)
Ending units		4,136		5,513		30,827		32,813		9		-	10,112		8,067

(Continued)

NATIONWIDE PROVIDENT VLI SEPARATE ACCOUNT-1

STATEMENTS OF CHANGES IN CONTRACT OWNERS’ EQUITY, Continued

Years Ended December 31, 2009 and 2008

	GVIDM					GVDMA				GVDMC				MCIF
	2009			2008		2009		2008		2009		2008		2009		2008
Investment activity:
Net investment income (loss)	$	269,350		332,778		122,545		449,374		17,509		50,827		7,368		20,264
Realized gain (loss) on investments		(1,395,314	)	(19,000	)	(1,090,842	)	(161,880	)	(192,541	)	(3,437	)	(234,063	)	4,325
Change in unrealized gain (loss) on investments		7,454,685		(5,695,195	)	4,639,507		(12,237,276	)	355,536		(503,601	)	1,026,845		(1,791,152	)
Reinvested capital gains		912,831		1,347,548		929,600		2,645,159		24,692		107,328		88,560		237,042
Net increase (decrease) in contract owners’ equity resulting from operations		7,241,552		(4,033,869	)	4,600,810		(9,304,623	)	205,196		(348,883	)	888,710		(1,529,521	)
Equity transactions:
Purchase payments received from contract owners		16,887,080		2,305,123		3,456,252		3,894,067		226,105		240,853		329,694		409,952
Transfers between funds (note 5)		12,237,151		1,646,216		(271,249	)	684,169		(457,117	)	316,617		(64,727	)	(44,067	)
Surrenders and Death Benefits (note 3 and note 5)		(3,178,723	)	(977,902	)	(910,058	)	(1,232,633	)	(98,744	)	(123,720	)	(306,625	)	(349,743	)
Net policy repayments (loans) (note 4)		16,831		(150,404	)	(95,826	)	(66,110	)	(1,010	)	(43,491	)	95		(44,593	)
Redemptions to pay cost of insurance charges and administration charges (note 5)		(2,822,483	)	(1,324,525	)	(2,033,922	)	(1,984,914	)	(157,208	)	(243,493	)	(222,409	)	(225,739	)
Adjustments to maintain reserves		18,227		(300	)	328		(492	)	647		-		841		(100	)
Net equity transactions		23,158,083		1,498,208		145,525		1,294,087		(487,327	)	146,766		(263,131	)	(254,290	)
Net change in contract owners’ equity		30,399,635		(2,535,661	)	4,746,335		(8,010,536	)	(282,131	)	(202,117	)	625,579		(1,783,811	)
Contract owners’ equity beginning of period		14,102,418		16,638,079		19,852,890		27,863,426		1,935,499		2,137,616		2,580,849		4,364,660
Contract owners’ equity end of period	$	44,502,053		14,102,418		24,599,225		19,852,890		1,653,368		1,935,499		3,206,428		2,580,849
CHANGES IN UNITS:
Beginning units		115,641		103,981		163,360		155,909		15,086		14,050		18,702		20,047
Units purchased		131,439		30,932		32,965		37,067		2,457		4,353		3,903		4,174
Units redeemed		(47,918	)	(19,272	)	(32,926	)	(29,616	)	(6,432	)	(3,317	)	(5,746	)	(5,519	)
Ending units		199,162		115,641		163,399		163,360		11,111		15,086		16,859		18,702

(Continued)

NATIONWIDE PROVIDENT VLI SEPARATE ACCOUNT-1

STATEMENTS OF CHANGES IN CONTRACT OWNERS’ EQUITY, Continued

Years Ended December 31, 2009 and 2008

	NVMIG3					GVDIV3				GVDIV4				NVMLG1
	2009			2008		2009		2008		2009		2008		2009		2008
Investment activity:
Net investment income (loss)	$	894		2		230,122		250,799		283,635		363,713		869		-
Realized gain (loss) on investments		18,811		(26	)	(2,455,851	)	(645,906	)	(1,571,735	)	399,632		26,154		-
Change in unrealized gain (loss) on investments		200,430		97		6,337,362		(16,023,258	)	6,308,976		(24,400,410	)	170,522		12
Reinvested capital gains		-		-		-		3,317,552		-		4,758,678		-		-
Net increase (decrease) in contract owners’ equity resulting from operations		220,135		73		4,111,633		(13,100,813	)	5,020,876		(18,878,387	)	197,545		12
Equity transactions:
Purchase payments received from contract owners		64,598		2,051		2,476,941		2,936,676		(536	)	269,014		88,773		108
Transfers between funds (note 5)		1,609,828		1,135		(1,016,398	)	(57,050	)	(787,834	)	(2,046,751	)	1,518,430		126
Surrenders and Death Benefits (note 3 and note 5)		(6,199	)	-		(1,712,081	)	(2,732,209	)	(1,647,228	)	(1,967,073	)	(2,970	)	-
Net policy repayments (loans) (note 4)		100		-		119,206		(64,981	)	30,670		26,929		236		-
Redemptions to pay cost of insurance charges and administration charges (note 5)		(56,685	)	(796	)	(1,226,443	)	(1,272,605	)	(1,544,210	)	(1,802,456	)	(53,656	)	(17	)
Adjustments to maintain reserves		(104,817	)	(1	)	(2,733	)	36,987		(6,215	)	(14,500	)	(191,299	)	-
Net equity transactions		1,506,825		2,389		(1,361,508	)	(1,153,182	)	(3,955,353	)	(5,534,837	)	1,359,514		217
Net change in contract owners’ equity		1,726,960		2,462		2,750,125		(14,253,995	)	1,065,523		(24,413,224	)	1,557,059		229
Contract owners’ equity beginning of period		2,462		-		14,971,527		29,225,522		20,067,373		44,480,597		229		-
Contract owners’ equity end of period	$	1,729,422		2,462		17,721,652		14,971,527		21,132,896		20,067,373		1,557,288		229
CHANGES IN UNITS:
Beginning units		40		-		140,630		148,290		59,201		72,492		4		-
Units purchased		24,285		54		32,260		32,836		1,410		1,245		23,195		4
Units redeemed		(3,439	)	(14	)	(45,573	)	(40,496	)	(12,919	)	(14,536	)	(4,117	)	-
Ending units		20,886		40		127,317		140,630		47,692		59,201		19,082		4

(Continued)

NATIONWIDE PROVIDENT VLI SEPARATE ACCOUNT-1

STATEMENTS OF CHANGES IN CONTRACT OWNERS’ EQUITY, Continued

Years Ended December 31, 2009 and 2008

	NVMLV1					NVMMG1				NVMMV2				SCGF
	2009			2008		2009		2008		2009		2008		2009		2008
Investment activity:
Net investment income (loss)	$	3,799		122		(190,095	)	(3	)	9,311		8		(9,363	)	(11,296	)
Realized gain (loss) on investments		16,096		(228	)	545,719		(592	)	36,581		(1	)	(230,192	)	(51,617	)
Change in unrealized gain (loss) on investments		131,173		(5,628	)	8,726,883		12		536,262		(1	)	577,555		(937,303	)
Reinvested capital gains		-		-		-		-		-		-		-		-
Net increase (decrease) in contract owners’ equity resulting from operations		151,068		(5,734	)	9,082,507		(583	)	582,154		6		338,000		(1,000,216	)
Equity transactions:
Purchase payments received from contract owners		60,760		782		12,144,856		366		165,646		364		131,276		156,557
Transfers between funds (note 5)		1,312,903		37,593		32,209,843		523		5,039,393		836		112,740		129,107
Surrenders and Death Benefits (note 3 and note 5)		(26,520	)	-		(3,302,093	)	-		(20,644	)	-		(78,613	)	(83,468	)
Net policy repayments (loans) (note 4)		(219	)	-		1,509		-		241		-		2,277		(5,276	)
Redemptions to pay cost of insurance charges and administration charges (note 5)		(50,473	)	(570	)	(1,913,650	)	(88	)	(164,940	)	(16	)	(112,373	)	(94,609	)
Adjustments to maintain reserves		(67,487	)	(1	)	414,164		2		(331,319	)	-		(156	)	(66	)
Net equity transactions		1,228,964		37,804		39,554,629		803		4,688,377		1,184		55,151		102,245
Net change in contract owners’ equity		1,380,032		32,070		48,637,136		220		5,270,531		1,190		393,151		(897,971	)
Contract owners’ equity beginning of period		32,070		-		220		-		1,190		-		1,216,928		2,114,898
Contract owners’ equity end of period	$	1,412,102		32,070		48,637,356		220		5,271,721		1,190		1,610,079		1,216,928
CHANGES IN UNITS:
Beginning units		507		-		4		-		18		-		12,402		11,510
Units purchased		20,674		515		513,046		23		69,343		18		5,025		3,688
Units redeemed		(3,562	)	(8	)	(84,596	)	(19	)	(8,850	)	-		(4,531	)	(2,796	)
Ending units		17,619		507		428,454		4		60,511		18		12,896		12,402

(Continued)

NATIONWIDE PROVIDENT VLI SEPARATE ACCOUNT-1

STATEMENTS OF CHANGES IN CONTRACT OWNERS’ EQUITY, Continued

Years Ended December 31, 2009 and 2008

	SCVF4					SCF4				MSBF				GVEX4
	2009			2008		2009		2008		2009		2008		2009		2008
Investment activity:
Net investment income (loss)	$	(15,835	)	96,644		(66,093	)	30,279		127,668		106,563		1,799,361		1,951,701
Realized gain (loss) on investments		(1,576,665	)	(373,335	)	(3,117,703	)	(3,349,131	)	(96,278	)	(87,012	)	(9,562,959	)	(3,679,098	)
Change in unrealized gain (loss) on investments		5,419,229		(8,625,337	)	8,054,232		(12,405,418	)	269,870		(386,509	)	34,187,584		(69,250,291	)
Reinvested capital gains		-		-		-		4,939,782		-		41,774		-		-
Net increase (decrease) in contract owners’ equity resulting from operations		3,826,729		(8,902,028	)	4,870,436		(10,784,488	)	301,260		(325,184	)	26,423,986		(70,977,688	)
Equity transactions:
Purchase payments received from contract owners		1,433,103		2,023,366		1,593,217		1,979,205		120,265		139,324		12,746,470		15,502,255
Transfers between funds (note 5)		(919,398	)	(1,813,027	)	(710,007	)	(1,305,344	)	26,636		(39,781	)	(4,577,411	)	(4,438,355	)
Surrenders and Death Benefits (note 3 and note 5)		(1,856,715	)	(2,260,928	)	(2,053,468	)	(1,813,058	)	(89,149	)	(215,214	)	(9,407,413	)	(10,085,294	)
Net policy repayments (loans) (note 4)		7,962		(58,878	)	59,964		(205,135	)	684		(18,060	)	137,664		(453,088	)
Redemptions to pay cost of insurance charges and administration charges (note 5)		(1,467,839	)	(1,667,564	)	(1,587,756	)	(1,737,587	)	(120,042	)	(137,096	)	(12,191,932	)	(13,178,965	)
Adjustments to maintain reserves		(8,219	)	(3,500	)	(4,818	)	(3,188	)	(124	)	(150	)	(16,012	)	(14,000	)
Net equity transactions		(2,811,106	)	(3,780,531	)	(2,702,868	)	(3,085,107	)	(61,730	)	(270,977	)	(13,308,634	)	(12,667,447	)
Net change in contract owners’ equity		1,015,623		(12,682,559	)	2,167,568		(13,869,595	)	239,530		(596,161	)	13,115,352		(83,645,135	)
Contract owners’ equity beginning of period		17,198,078		29,880,637		16,029,436		29,899,031		1,295,655		1,891,816		113,048,338		196,693,473
Contract owners’ equity end of period	$	18,213,701		17,198,078		18,197,004		16,029,436		1,535,185		1,295,655		126,163,690		113,048,338
CHANGES IN UNITS:
Beginning units		122,276		142,316		123,710		142,233		9,850		12,772		374,555		410,597
Units purchased		17,361		17,308		17,932		17,493		3,173		2,294		53,947		54,268
Units redeemed		(34,415	)	(37,348	)	(39,392	)	(36,016	)	(3,048	)	(5,216	)	(96,595	)	(90,310	)
Ending units		105,222		122,276		102,250		123,710		9,975		9,850		331,907		374,555

(Continued)

NATIONWIDE PROVIDENT VLI SEPARATE ACCOUNT-1

STATEMENTS OF CHANGES IN CONTRACT OWNERS’ EQUITY, Continued

Years Ended December 31, 2009 and 2008

	NVSTB2					GGTC				GGTC3				GVUG1
	2009			2008		2009		2008		2009		2008		2009		2008
Investment activity:
Net investment income (loss)	$	11,069		250		(1,126	)	(1,616	)	(2,619	)	(3,365	)	(8,767	)	(13,383	)
Realized gain (loss) on investments		1,733		(6	)	(80,340	)	(7,468	)	(82,980	)	(37,304	)	(319,654	)	(101,691	)
Change in unrealized gain (loss) on investments		(5,654	)	(355	)	156,789		(196,574	)	240,243		(316,632	)	601,860		(1,235,221	)
Reinvested capital gains		4,046		-		-		34,108		-		67,035		-		389,672
Net increase (decrease) in contract owners’ equity resulting from operations		11,194		(111	)	75,323		(171,550	)	154,644		(290,266	)	273,439		(960,623	)
Equity transactions:
Purchase payments received from contract owners		23,152		923		11,625		2,208		67,218		98,865		136,075		198,165
Transfers between funds (note 5)		1,300,797		26,191		22,395		(107,034	)	72,621		19,687		(190,678	)	74,889
Surrenders and Death Benefits (note 3 and note 5)		(57,200	)	-		(563	)	(3,362	)	(3,865	)	(38,536	)	(203,092	)	(104,083	)
Net policy repayments (loans) (note 4)		(3,464	)	-		1,589		2,174		(967	)	(15,290	)	2,813		(7,432	)
Redemptions to pay cost of insurance charges and administration charges (note 5)		(49,932	)	(275	)	(15,126	)	(15,512	)	(43,204	)	(44,498	)	(130,138	)	(119,107	)
Adjustments to maintain reserves		(15	)	(1	)	888		(400	)	(304	)	186		(859	)	77
Net equity transactions		1,213,338		26,838		20,808		(121,926	)	91,499		20,414		(385,879	)	42,509
Net change in contract owners’ equity		1,224,532		26,727		96,131		(293,476	)	246,143		(269,852	)	(112,440	)	(918,114	)
Contract owners’ equity beginning of period		26,727		-		149,145		442,621		308,542		578,394		1,289,547		2,207,661
Contract owners’ equity end of period	$	1,251,259		26,727		245,276		149,145		554,685		308,542		1,177,107		1,289,547
CHANGES IN UNITS:
Beginning units		270		-		597		1,072		4,263		4,082		10,337		10,241
Units purchased		14,006		273		148		31		2,166		1,594		1,520		2,303
Units redeemed		(2,392	)	(3	)	(167	)	(506	)	(1,361	)	(1,413	)	(4,404	)	(2,207	)
Ending units		11,884		270		578		597		5,068		4,263		7,453		10,337

(Continued)

NATIONWIDE PROVIDENT VLI SEPARATE ACCOUNT-1

STATEMENTS OF CHANGES IN CONTRACT OWNERS’ EQUITY, Continued

Years Ended December 31, 2009 and 2008

	NVOLG1				NVTIV3			EIF4				NVRE1
	2009			2008	2009		2008	2009		2008		2009		2008
Investment activity:
Net investment income (loss)	$	(50	)	-	8		-	67,345		302,882		15,092		376
Realized gain (loss) on investments		283		-	24		-	(679,666	)	309,107		24,190		(495	)
Change in unrealized gain (loss) on investments		6,877		-	255		-	4,406,436		(10,821,911	)	375,834		(5,800	)
Reinvested capital gains		1,382		-	19		-	-		318,857		8,844		-
Net increase (decrease) in contract owners’ equity resulting from operations		8,492		-	306		-	3,794,115		(9,891,065	)	423,960		(5,919	)
Equity transactions:
Purchase payments received from contract owners		598		-	386		-	1,501,641		1,955,467		125,032		1,332
Transfers between funds (note 5)		51,745		-	11,050		-	(1,005,516	)	(981,150	)	2,537,253		18,220
Surrenders and Death Benefits (note 3 and note 5)		-		-	-		-	(1,753,982	)	(2,223,333	)	(139,317	)	-
Net policy repayments (loans) (note 4)		-		-	-		-	(37,970	)	(106,143	)	(607	)	-
Redemptions to pay cost of insurance charges and administration charges (note 5)		(545	)	-	(174	)	-	(1,418,266	)	(1,562,098	)	(94,034	)	(462	)
Adjustments to maintain reserves		32,557		-	(25	)	-	(13,245	)	(4,000	)	(39	)	(2	)
Net equity transactions		84,355		-	11,237		-	(2,727,338	)	(2,921,257	)	2,428,288		19,088
Net change in contract owners’ equity		92,847		-	11,543		-	1,066,777		(12,812,322	)	2,852,248		13,169
Contract owners’ equity beginning of period		-		-	-		-	15,646,083		28,458,405		13,169		-
Contract owners’ equity end of period	$	92,847		-	11,543		-	16,712,860		15,646,083		2,865,417		13,169
CHANGES IN UNITS:
Beginning units		-		-	-		-	125,870		141,480		234		-
Units purchased		404		-	98		-	18,505		20,771		44,404		242
Units redeemed		(15	)	-	(9	)	-	(38,210	)	(36,381	)	(5,382	)	(8	)
Ending units		389		-	89		-	106,165		125,870		39,256		234

(Continued)

NATIONWIDE PROVIDENT VLI SEPARATE ACCOUNT-1

STATEMENTS OF CHANGES IN CONTRACT OWNERS’ EQUITY, Continued

Years Ended December 31, 2009 and 2008

	SAM4					AMTB				AVBVI				AVCA
	2009			2008		2009		2008		2009		2008		2009		2008
Investment activity:
Net investment income (loss)	$	(343,818	)	889,109		761,048		525,603		(2,877	)	4,166		(200	)	(2,207	)
Realized gain (loss) on investments		-		-		(398,907	)	(474,197	)	(1,346,721	)	(148,487	)	(24,362	)	(6,795	)
Change in unrealized gain (loss) on investments		-		-		906,313		(1,993,549	)	1,763,205		(1,810,393	)	68,844		(158,223	)
Reinvested capital gains		-		-		-		-		-		432,981		-		-
Net increase (decrease) in contract owners’ equity resulting from operations		(343,818	)	889,109		1,268,454		(1,942,143	)	413,607		(1,521,733	)	44,282		(167,225	)
Equity transactions:
Purchase payments received from contract owners		8,875,625		7,831,408		915,740		1,224,515		133,211		283,727		42,771		51,440
Transfers between funds (note 5)		15,784,153		13,802,611		571,207		(939,004	)	(1,459,694	)	78,904		7,622		31,165
Surrenders and Death Benefits (note 3 and note 5)		(20,378,746	)	(12,782,069	)	(1,041,949	)	(1,178,018	)	(146,416	)	(275,274	)	(17,563	)	(44,337	)
Net policy repayments (loans) (note 4)		(301,448	)	(453,190	)	15,277		(95,450	)	1,144		(5,610	)	(1,613	)	(1,367	)
Redemptions to pay cost of insurance charges and administration charges (note 5)		(7,575,562	)	(6,381,049	)	(1,007,546	)	(1,054,240	)	(107,079	)	(193,296	)	(31,468	)	(33,522	)
Adjustments to maintain reserves		312,472		(5,500	)	(2,647	)	1,640		(51	)	(530	)	(3,289	)	14
Net equity transactions		(3,283,506	)	2,012,211		(549,918	)	(2,040,557	)	(1,578,885	)	(112,079	)	(3,540	)	3,393
Net change in contract owners’ equity		(3,627,324	)	2,901,320		718,536		(3,982,700	)	(1,165,278	)	(1,633,812	)	40,742		(163,832	)
Contract owners’ equity beginning of period		62,699,187		59,797,867		10,686,079		14,668,779		1,415,462		3,049,274		226,808		390,640
Contract owners’ equity end of period	$	59,071,863		62,699,187		11,404,615		10,686,079		250,184		1,415,462		267,550		226,808
CHANGES IN UNITS:
Beginning units		277,875		279,843		58,973		68,845		15,197		15,703		2,258		2,256
Units purchased		198,653		181,126		11,129		10,540		1,788		4,458		739		797
Units redeemed		(215,159	)	(183,094	)	(15,579	)	(20,412	)	(16,662	)	(4,964	)	(797	)	(795	)
Ending units		261,369		277,875		54,523		58,973		323		15,197		2,200		2,258

(Continued)

NATIONWIDE PROVIDENT VLI SEPARATE ACCOUNT-1

STATEMENTS OF CHANGES IN CONTRACT OWNERS’ EQUITY, Continued

Years Ended December 31, 2009 and 2008

	AVCDI					ALVGIA				ALVSVA				ACVIG
	2009			2008		2009		2008		2009		2008		2009		2008
Investment activity:
Net investment income (loss)	$	(7,800	)	(8,784	)	61,728		41,808		8,403		1,378		42,720		20,096
Realized gain (loss) on investments		(102,556	)	(14,471	)	(696,679	)	(217,182	)	(505,751	)	(161,968	)	(73,437	)	(46,018	)
Change in unrealized gain (loss) on investments		492,913		(918,800	)	958,012		(1,948,443	)	1,172,473		(1,415,988	)	213,688		(756,314	)
Reinvested capital gains		-		187,361		-		537,373		92,924		318,583		-		184,096
Net increase (decrease) in contract owners’ equity resulting from operations		382,557		(754,694	)	323,061		(1,586,444	)	768,049		(1,257,995	)	182,971		(598,140	)
Equity transactions:
Purchase payments received from contract owners		62,476		81,164		211,974		270,441		140,293		210,854		169,255		226,810
Transfers between funds (note 5)		(14,835	)	891,208		(258,588	)	(138,234	)	22,962		232,257		63,727		(234,934	)
Surrenders and Death Benefits (note 3 and note 5)		(25,365	)	(61,688	)	(225,379	)	(293,843	)	(155,302	)	(127,796	)	(27,839	)	(90,841	)
Net policy repayments (loans) (note 4)		(183	)	(14,145	)	(15,450	)	10,706		(22,122	)	(3,274	)	(17,366	)	536
Redemptions to pay cost of insurance charges and administration charges (note 5)		(67,938	)	(61,728	)	(182,530	)	(229,404	)	(162,342	)	(159,342	)	(98,159	)	(116,680	)
Adjustments to maintain reserves		(24	)	(30	)	(526	)	79		74		60		496		(2,300	)
Net equity transactions		(45,869	)	834,781		(470,499	)	(380,255	)	(176,437	)	152,759		90,114		(217,409	)
Net change in contract owners’ equity		336,688		80,087		(147,438	)	(1,966,699	)	591,612		(1,105,236	)	273,085		(815,549	)
Contract owners’ equity beginning of period		944,198		864,111		2,049,646		4,016,345		2,157,791		3,263,027		1,029,209		1,844,758
Contract owners’ equity end of period	$	1,280,886		944,198		1,902,208		2,049,646		2,749,403		2,157,791		1,302,294		1,029,209
CHANGES IN UNITS:
Beginning units		8,221		3,391		17,672		20,678		14,011		13,917		8,662		10,248
Units purchased		685		6,356		3,004		3,038		2,646		3,788		2,573		1,898
Units redeemed		(1,029	)	(1,526	)	(6,962	)	(6,044	)	(4,797	)	(3,694	)	(1,956	)	(3,484	)
Ending units		7,877		8,221		13,714		17,672		11,860		14,011		9,279		8,662

(Continued)

NATIONWIDE PROVIDENT VLI SEPARATE ACCOUNT-1

STATEMENTS OF CHANGES IN CONTRACT OWNERS’ EQUITY, Continued

Years Ended December 31, 2009 and 2008

	ACVIP2					ACVI				ACVI3				ACVMV1
	2009			2008		2009		2008		2009		2008		2009		2008
Investment activity:
Net investment income (loss)	$	27,970		102,604		7,348		1,689		24,179		1,248		19,137		(3,127	)
Realized gain (loss) on investments		13,323		(15,777	)	(92,486	)	106,010		(565,893	)	100,903		(95,666	)	(21,362	)
Change in unrealized gain (loss) on investments		192,445		(172,247	)	206,317		(612,426	)	782,670		(1,412,846	)	269,563		(145,679	)
Reinvested capital gains		-		-		-		78,675		-		198,026		-		-
Net increase (decrease) in contract owners’ equity resulting from operations		233,738		(85,420	)	121,179		(426,052	)	240,956		(1,112,669	)	193,034		(170,168	)
Equity transactions:
Purchase payments received from contract owners		171,313		160,584		22,608		27,489		118,963		215,165		59,931		63,942
Transfers between funds (note 5)		452,489		751,087		(110,704	)	(100,190	)	(1,620,552	)	95,817		86,014		274,889
Surrenders and Death Benefits (note 3 and note 5)		(83,417	)	(166,125	)	(15,404	)	(171,364	)	(47,748	)	(152,364	)	(79,626	)	(33,535	)
Net policy repayments (loans) (note 4)		(30,531	)	(24,286	)	221		(2,851	)	(366	)	(26,326	)	(3,080	)	(13,464	)
Redemptions to pay cost of insurance charges and administration charges (note 5)		(202,677	)	(144,504	)	(34,396	)	(57,386	)	(83,701	)	(139,343	)	(48,761	)	(35,382	)
Adjustments to maintain reserves		(778	)	161		(739	)	2,000		(170	)	(21	)	(51	)	10
Net equity transactions		306,399		576,917		(138,414	)	(302,302	)	(1,633,574	)	(7,072	)	14,427		256,460
Net change in contract owners’ equity		540,137		491,497		(17,235	)	(728,354	)	(1,392,618	)	(1,119,741	)	207,461		86,292
Contract owners’ equity beginning of period		2,345,551		1,854,054		464,731		1,193,085		1,392,618		2,512,359		536,858		450,566
Contract owners’ equity end of period	$	2,885,688		2,345,551		447,496		464,731		-		1,392,618		744,319		536,858
CHANGES IN UNITS:
Beginning units		16,799		13,169		1,782		2,778		13,738		13,575		5,470		3,449
Units purchased		8,213		9,151		110		32		1,386		4,830		3,831		3,524
Units redeemed		(7,091	)	(5,521	)	(1,348	)	(1,028	)	(15,124	)	(4,667	)	(3,423	)	(1,503	)
Ending units		17,921		16,799		544		1,782		-		13,738		5,878		5,470

(Continued)

NATIONWIDE PROVIDENT VLI SEPARATE ACCOUNT-1

STATEMENTS OF CHANGES IN CONTRACT OWNERS’ EQUITY, Continued

Years Ended December 31, 2009 and 2008

	ACVU1					ACVV				ACVVS1				DVSCS
	2009			2008		2009		2008		2009		2008		2009		2008
Investment activity:
Net investment income (loss)	$	(2,062	)	(13,788	)	259,342		121,337		(1,499	)	(3,420	)	80,357		8,308
Realized gain (loss) on investments		(645,934	)	(72,625	)	(949,971	)	(577,574	)	(253,495	)	(24,373	)	(910,754	)	(28,638	)
Change in unrealized gain (loss) on investments		873,857		(1,217,746	)	1,607,909		(2,575,407	)	284,844		(320,360	)	1,155,293		(2,878,690	)
Reinvested capital gains		-		302,276		-		902,057		-		21,853		771,583		864,283
Net increase (decrease) in contract owners’ equity resulting from operations		225,861		(1,001,883	)	917,280		(2,129,587	)	29,850		(326,300	)	1,096,479		(2,034,737	)
Equity transactions:
Purchase payments received from contract owners		153,268		320,817		519,474		645,273		21,585		54,579		936,063		1,149,826
Transfers between funds (note 5)		(1,464,447	)	28,602		(122,872	)	(412,623	)	(325,670	)	164,327		(21,719	)	(370,713	)
Surrenders and Death Benefits (note 3 and note 5)		(37,055	)	(142,680	)	(350,674	)	(542,356	)	(53,485	)	(9,232	)	(459,511	)	(554,465	)
Net policy repayments (loans) (note 4)		3,694		(5,641	)	(84,243	)	(8,173	)	(4,870	)	(7,334	)	(59,116	)	(42,701	)
Redemptions to pay cost of insurance charges and administration charges (note 5)		(107,484	)	(180,580	)	(448,132	)	(466,093	)	(20,205	)	(36,809	)	(562,925	)	(539,197	)
Adjustments to maintain reserves		100		(500	)	(823	)	(500	)	(56	)	17		148		(1,500	)
Net equity transactions		(1,451,924	)	20,018		(487,270	)	(784,472	)	(382,701	)	165,548		(167,060	)	(358,750	)
Net change in contract owners’ equity		(1,226,063	)	(981,865	)	430,010		(2,914,059	)	(352,851	)	(160,752	)	929,419		(2,393,487	)
Contract owners’ equity beginning of period		1,363,004		2,344,869		5,287,287		8,201,346		364,258		525,010		4,395,118		6,788,604
Contract owners’ equity end of period	$	136,941		1,363,004		5,717,297		5,287,287		11,407		364,258		5,324,537		4,395,118
CHANGES IN UNITS:
Beginning units		17,502		17,069		44,924		50,637		4,165		3,062		31,726		33,536
Units purchased		2,576		4,751		8,117		7,684		839		3,123		10,150		9,058
Units redeemed		(19,687	)	(4,318	)	(13,063	)	(13,397	)	(4,897	)	(2,020	)	(10,991	)	(10,868	)
Ending units		391		17,502		39,978		44,924		107		4,165		30,885		31,726

(Continued)

NATIONWIDE PROVIDENT VLI SEPARATE ACCOUNT-1

STATEMENTS OF CHANGES IN CONTRACT OWNERS’ EQUITY, Continued

Years Ended December 31, 2009 and 2008

	DSIF					DCAP				DSC				FVCA2P
	2009			2008		2009		2008		2009		2008		2009		2008
Investment activity:
Net investment income (loss)	$	84,917		119,569		46,436		50,176		926		231		46		(366	)
Realized gain (loss) on investments		(529,386	)	138,588		(219,617	)	73,525		(19,777	)	(6,061	)	(2,165	)	2,540
Change in unrealized gain (loss) on investments		1,521,743		(4,122,516	)	475,477		(1,592,418	)	43,878		(59,303	)	16,381		(37,431	)
Reinvested capital gains		389,701		-		185,853		283,048		-		6,861		-		2,095
Net increase (decrease) in contract owners’ equity resulting from operations		1,466,975		(3,864,359	)	488,149		(1,185,669	)	25,027		(58,272	)	14,262		(33,162	)
Equity transactions:
Purchase payments received from contract owners		1,007,849		1,244,301		311,455		411,411		16,519		22,286		12,848		13,221
Transfers between funds (note 5)		(498,453	)	(606,813	)	(30,266	)	(302,441	)	1,773		(682	)	29,038		(21,800	)
Surrenders and Death Benefits (note 3 and note 5)		(447,593	)	(1,040,312	)	(371,902	)	(848,531	)	(995	)	(463	)	(2,613	)	(10,102	)
Net policy repayments (loans) (note 4)		16,824		(40,475	)	(19,887	)	(2,595	)	(2,568	)	634		(237	)	(316	)
Redemptions to pay cost of insurance charges and administration charges (note 5)		(624,469	)	(669,877	)	(309,294	)	(310,145	)	(8,879	)	(9,729	)	(10,066	)	(9,499	)
Adjustments to maintain reserves		384		(2,800	)	(662	)	1,736		367		(17	)	(336	)	(49	)
Net equity transactions		(545,458	)	(1,115,976	)	(420,556	)	(1,050,565	)	6,217		12,029		28,634		(28,545	)
Net change in contract owners’ equity		921,517		(4,980,335	)	67,593		(2,236,234	)	31,244		(46,243	)	42,896		(61,707	)
Contract owners’ equity beginning of period		6,175,241		11,155,576		2,404,848		4,641,082		100,867		147,110		63,754		125,461
Contract owners’ equity end of period	$	7,096,758		6,175,241		2,472,441		2,404,848		132,111		100,867		106,650		63,754
CHANGES IN UNITS:
Beginning units		53,706		61,314		23,951		31,661		993		879		559		770
Units purchased		12,693		13,415		4,632		3,887		273		237		342		107
Units redeemed		(16,132	)	(21,023	)	(8,997	)	(11,597	)	(146	)	(123	)	(134	)	(318	)
Ending units		50,267		53,706		19,586		23,951		1,120		993		767		559

(Continued)

NATIONWIDE PROVIDENT VLI SEPARATE ACCOUNT-1

STATEMENTS OF CHANGES IN CONTRACT OWNERS’ EQUITY, Continued

Years Ended December 31, 2009 and 2008

	FALF					FQB				FEIP				FHIP
	2009			2008		2009		2008		2009		2008		2009		2008
Investment activity:
Net investment income (loss)	$	1,013		871		136,861		131,878		1,250,082		2,142,184		670,153		934,285
Realized gain (loss) on investments		(33,183	)	(14,388	)	(58,006	)	(104,427	)	(10,496,496	)	(4,519,304	)	(1,103,577	)	(564,476	)
Change in unrealized gain (loss) on investments		38,862		(36,077	)	337,173		(284,977	)	30,301,306		(60,310,447	)	3,831,137		(3,615,550	)
Reinvested capital gains		-		21,339		-		-		-		126,988		-		-
Net increase (decrease) in contract owners’ equity resulting from operations		6,692		(28,255	)	416,028		(257,526	)	21,054,892		(62,560,579	)	3,397,713		(3,245,741	)
Equity transactions:
Purchase payments received from contract owners		6,195		10,004		311,315		408,598		7,859,478		9,592,950		352,079		266,464
Transfers between funds (note 5)		(3,780	)	(9,588	)	522,675		(11,668	)	(4,405,924	)	(3,130,801	)	(108,518	)	(474,422	)
Surrenders and Death Benefits (note 3 and note 5)		(5,254	)	(646	)	(434,775	)	(497,122	)	(7,679,037	)	(8,825,156	)	(1,526,481	)	(972,366	)
Net policy repayments (loans) (note 4)		(4,815	)	(68	)	5,841		(725	)	64,955		(422,797	)	(21,321	)	(18,454	)
Redemptions to pay cost of insurance charges and administration charges (note 5)		(9,199	)	(8,778	)	(276,023	)	(318,161	)	(7,945,826	)	(8,810,846	)	(894,509	)	(946,292	)
Adjustments to maintain reserves		(91	)	(80	)	(11	)	(200	)	(24,425	)	3,000		1,359		(3,500	)
Net equity transactions		(16,944	)	(9,156	)	129,022		(419,278	)	(12,130,779	)	(11,593,650	)	(2,197,391	)	(2,148,570	)
Net change in contract owners’ equity		(10,252	)	(37,411	)	545,050		(676,804	)	8,924,113		(74,154,229	)	1,200,322		(5,394,311	)
Contract owners’ equity beginning of period		53,326		90,737		2,291,133		2,967,937		79,606,232		153,760,461		8,964,912		14,359,223
Contract owners’ equity end of period	$	43,074		53,326		2,836,183		2,291,133		88,530,345		79,606,232		10,165,234		8,964,912
CHANGES IN UNITS:
Beginning units		547		612		19,621		24,177		259,698		289,559		43,872		54,865
Units purchased		84		101		7,092		6,079		36,504		37,027		2,354		1,150
Units redeemed		(242	)	(166	)	(9,335	)	(10,635	)	(73,455	)	(66,888	)	(15,236	)	(12,143	)
Ending units		389		547		17,378		19,621		222,747		259,698		30,990		43,872

(Continued)

NATIONWIDE PROVIDENT VLI SEPARATE ACCOUNT-1

STATEMENTS OF CHANGES IN CONTRACT OWNERS’ EQUITY, Continued

Years Ended December 31, 2009 and 2008

	FAMP					FCP				FNRS2				FEIS
	2009			2008		2009		2008		2009		2008		2009		2008
Investment activity:
Net investment income (loss)	$	538,794		772,285		612,431		382,448		(5,830	)	(13,064	)	42,270		60,394
Realized gain (loss) on investments		(1,151,758	)	(1,098,578	)	(6,035,738	)	(2,645,205	)	(204,812	)	88,836		(344,075	)	(135,728	)
Change in unrealized gain (loss) on investments		8,351,694		(16,401,381	)	31,742,822		(65,877,350	)	692,375		(1,423,677	)	1,087,296		(1,689,968	)
Reinvested capital gains		51,865		4,111,325		23,593		3,625,280		-		66,346		-		3,238
Net increase (decrease) in contract owners’ equity resulting from operations		7,790,595		(12,616,349	)	26,343,108		(64,514,827	)	481,733		(1,281,559	)	785,491		(1,762,064	)
Equity transactions:
Purchase payments received from contract owners		3,073,386		3,134,726		7,094,783		8,612,665		187,686		163,458		762,419		1,014,879
Transfers between funds (note 5)		(578,478	)	(259,514	)	(3,845,134	)	(2,377,480	)	217,696		679,124		1,465		(8,599	)
Surrenders and Death Benefits (note 3 and note 5)		(2,624,502	)	(2,932,356	)	(7,486,520	)	(7,216,122	)	(143,266	)	(331,598	)	(294,501	)	(177,601	)
Net policy repayments (loans) (note 4)		276,547		(296,286	)	(196,001	)	(532,572	)	(15,226	)	(22,143	)	(8,494	)	503
Redemptions to pay cost of insurance charges and administration charges (note 5)		(3,065,849	)	(3,189,036	)	(7,098,701	)	(7,630,710	)	(134,692	)	(122,205	)	(483,725	)	(412,763	)
Adjustments to maintain reserves		(993	)	(4,000	)	(8,791	)	(4,500	)	(15	)	110		392		-
Net equity transactions		(2,919,889	)	(3,546,466	)	(11,540,364	)	(9,148,719	)	112,183		366,746		(22,444	)	416,419
Net change in contract owners’ equity		4,870,706		(16,162,815	)	14,802,744		(73,663,546	)	593,916		(914,813	)	763,047		(1,345,645	)
Contract owners’ equity beginning of period		29,445,988		45,608,803		83,236,910		156,900,456		1,018,628		1,933,441		2,451,436		3,797,081
Contract owners’ equity end of period	$	34,316,694		29,445,988		98,039,654		83,236,910		1,612,544		1,018,628		3,214,483		2,451,436
CHANGES IN UNITS:
Beginning units		101,048		115,363		305,223		329,483		9,988		8,579		25,036		22,053
Units purchased		13,429		15,297		37,766		39,813		4,538		6,345		8,406		8,654
Units redeemed		(22,718	)	(29,612	)	(78,167	)	(64,073	)	(3,736	)	(4,936	)	(8,008	)	(5,671	)
Ending units		91,759		101,048		264,822		305,223		10,790		9,988		25,434		25,036

(Continued)

NATIONWIDE PROVIDENT VLI SEPARATE ACCOUNT-1

STATEMENTS OF CHANGES IN CONTRACT OWNERS’ EQUITY, Continued

Years Ended December 31, 2009 and 2008

	FF10S					FF20S				FF30S				FGP
	2009			2008		2009		2008		2009		2008		2009		2008
Investment activity:
Net investment income (loss)	$	10,693		7,674		31,708		17,500		14,518		14,952		(222,590	)	218,908
Realized gain (loss) on investments		(21,516	)	(4,783	)	(76,593	)	36		(57,513	)	(55,611	)	(16,744,109	)	(9,512,954	)
Change in unrealized gain (loss) on investments		80,817		(137,602	)	241,720		(403,653	)	271,767		(513,291	)	41,479,823		(82,130,781	)
Reinvested capital gains		2,611		17,526		11,694		48,394		11,972		75,736		85,351		-
Net increase (decrease) in contract owners’ equity resulting from operations		72,605		(117,185	)	208,529		(337,723	)	240,744		(478,214	)	24,598,475		(91,424,827	)
Equity transactions:
Purchase payments received from contract owners		19,489		13,264		54,304		64,587		110,740		137,580		11,243,273		13,488,541
Transfers between funds (note 5)		6,592		198,898		302,918		184,164		101,383		(75,584	)	(3,362,364	)	(3,697,321	)
Surrenders and Death Benefits (note 3 and note 5)		(23,858	)	(294,829	)	(38,202	)	(9,838	)	(51,351	)	(905	)	(10,180,460	)	(11,584,707	)
Net policy repayments (loans) (note 4)		(2,471	)	-		(218	)	154		408		77,696		248,464		(390,207	)
Redemptions to pay cost of insurance charges and administration charges (note 5)		(18,380	)	(40,681	)	(59,436	)	(52,496	)	(44,857	)	(57,434	)	(11,034,230	)	(12,182,939	)
Adjustments to maintain reserves		(93	)	12		(66	)	32		(10	)	37		(12,240	)	18,500
Net equity transactions		(18,721	)	(123,336	)	259,300		186,603		116,313		81,390		(13,097,557	)	(14,348,133	)
Net change in contract owners’ equity		53,884		(240,521	)	467,829		(151,120	)	357,057		(396,824	)	11,500,918		(105,772,960	)
Contract owners’ equity beginning of period		312,524		553,045		727,539		878,659		751,003		1,147,827		98,150,957		203,923,917
Contract owners’ equity end of period	$	366,408		312,524		1,195,368		727,539		1,108,060		751,003		109,651,875		98,150,957
CHANGES IN UNITS:
Beginning units		3,319		4,370		8,101		6,538		8,736		8,209		380,893		417,459
Units purchased		320		1,815		5,192		2,124		2,236		2,863		57,583		62,928
Units redeemed		(482	)	(2,866	)	(2,882	)	(561	)	(1,091	)	(2,336	)	(105,286	)	(99,494	)
Ending units		3,157		3,319		10,411		8,101		9,881		8,736		333,190		380,893

(Continued)

NATIONWIDE PROVIDENT VLI SEPARATE ACCOUNT-1

STATEMENTS OF CHANGES IN CONTRACT OWNERS’ EQUITY, Continued

Years Ended December 31, 2009 and 2008

	FGS					FHIPR				FIGBP				FIGBS
	2009			2008		2009		2008		2009		2008		2009		2008
Investment activity:
Net investment income (loss)	$	(7,111	)	537		271,804		262,144		2,981,574		1,564,142		96,485		42,576
Realized gain (loss) on investments		(88,640	)	56,439		(296,373	)	(238,997	)	(563,041	)	(1,221,231	)	(10,371	)	(29,593	)
Change in unrealized gain (loss) on investments		540,361		(1,351,963	)	1,321,978		(854,494	)	2,509,871		(2,015,027	)	74,819		(72,810	)
Reinvested capital gains		1,501		-		-		-		145,038		35,989		4,883		1,039
Net increase (decrease) in contract owners’ equity resulting from operations		446,111		(1,294,987	)	1,297,409		(831,347	)	5,073,442		(1,636,127	)	165,816		(58,788	)
Equity transactions:
Purchase payments received from contract owners		443,270		583,470		766,422		898,534		3,324,479		3,294,766		225,158		267,021
Transfers between funds (note 5)		(10,311	)	122,125		292,128		(373,653	)	2,474,792		(3,543,619	)	760		49,116
Surrenders and Death Benefits (note 3 and note 5)		(271,662	)	(165,656	)	(372,039	)	(274,797	)	(4,127,777	)	(6,099,303	)	(88,101	)	(248,891	)
Net policy repayments (loans) (note 4)		(1,641	)	(3,358	)	(31,282	)	(29,757	)	(238,343	)	(273,333	)	(195	)	(428	)
Redemptions to pay cost of insurance charges and administration charges (note 5)		(301,342	)	(258,189	)	(369,061	)	(288,658	)	(3,235,111	)	(3,172,267	)	(118,521	)	(145,395	)
Adjustments to maintain reserves		125		-		179		(91	)	(3,569	)	(7,000	)	60		-
Net equity transactions		(141,561	)	278,392		286,347		(68,422	)	(1,805,529	)	(9,800,756	)	19,161		(78,577	)
Net change in contract owners’ equity		304,550		(1,016,595	)	1,583,756		(899,769	)	3,267,913		(11,436,883	)	184,977		(137,365	)
Contract owners’ equity beginning of period		1,550,016		2,566,611		2,495,409		3,395,178		35,216,723		46,653,606		1,133,374		1,270,739
Contract owners’ equity end of period	$	1,854,566		1,550,016		4,079,165		2,495,409		38,484,636		35,216,723		1,318,351		1,133,374
CHANGES IN UNITS:
Beginning units		16,514		14,322		33,979		34,486		138,130		181,072		10,024		10,782
Units purchased		4,875		6,003		24,477		18,783		36,251		23,647		2,380		3,463
Units redeemed		(5,855	)	(3,811	)	(19,564	)	(19,290	)	(45,604	)	(66,589	)	(2,248	)	(4,221	)
Ending units		15,534		16,514		38,892		33,979		128,777		138,130		10,156		10,024

(Continued)

NATIONWIDE PROVIDENT VLI SEPARATE ACCOUNT-1

STATEMENTS OF CHANGES IN CONTRACT OWNERS’ EQUITY, Continued

Years Ended December 31, 2009 and 2008

	FMCS					FOP				FOPR				FOS
	2009			2008		2009		2008		2009		2008		2009		2008
Investment activity:
Net investment income (loss)	$	(10,162	)	(45,472	)	238,263		514,595		295,825		528,505		877		2,212
Realized gain (loss) on investments		(1,071,368	)	(81,581	)	(242,604	)	1,210,368		(941,040	)	529,190		(7,967	)	24,263
Change in unrealized gain (loss) on investments		4,391,584		(8,589,870	)	3,884,106		(20,579,915	)	5,204,616		(18,724,942	)	23,490		(126,904	)
Reinvested capital gains		53,385		2,271,637		54,316		3,597,661		61,996		3,181,411		252		22,788
Net increase (decrease) in contract owners’ equity resulting from operations		3,363,439		(6,445,286	)	3,934,081		(15,257,291	)	4,621,397		(14,485,836	)	16,652		(77,641	)
Equity transactions:
Purchase payments received from contract owners		874,381		1,070,996		250,758		415,489		2,980,417		3,264,305		1,749		2,724
Transfers between funds (note 5)		(281,119	)	(87,055	)	(640,665	)	(862,836	)	(204,254	)	604,246		(2,530	)	(1,908	)
Surrenders and Death Benefits (note 3 and note 5)		(886,745	)	(678,567	)	(1,709,649	)	(2,265,835	)	(1,801,082	)	(1,969,460	)	(9,085	)	(46,792	)
Net policy repayments (loans) (note 4)		(107,210	)	41,565		81,885		(369,922	)	(104,560	)	(235,270	)	(2,202	)	(555	)
Redemptions to pay cost of insurance charges and administration charges (note 5)		(784,972	)	(823,455	)	(1,491,243	)	(1,693,254	)	(1,406,014	)	(1,445,721	)	(12,975	)	(24,736	)
Adjustments to maintain reserves		(155	)	100		(15,471	)	1,568		2,845		30,070		81		-
Net equity transactions		(1,185,820	)	(476,416	)	(3,524,385	)	(4,774,790	)	(532,648	)	248,170		(24,962	)	(71,267	)
Net change in contract owners’ equity		2,177,619		(6,921,702	)	409,696		(20,032,081	)	4,088,749		(14,237,666	)	(8,310	)	(148,908	)
Contract owners’ equity beginning of period		9,559,231		16,480,933		17,834,053		37,866,134		18,340,348		32,578,014		88,714		237,622
Contract owners’ equity end of period	$	11,736,850		9,559,231		18,243,749		17,834,053		22,429,097		18,340,348		80,404		88,714
CHANGES IN UNITS:
Beginning units		50,517		52,370		69,280		88,555		154,536		150,134		634		948
Units purchased		9,706		9,033		2,576		2,115		35,587		39,476		16		17
Units redeemed		(16,121	)	(10,886	)	(16,635	)	(21,390	)	(40,692	)	(35,074	)	(192	)	(331	)
Ending units		44,102		50,517		55,221		69,280		149,431		154,536		458		634

(Continued)

NATIONWIDE PROVIDENT VLI SEPARATE ACCOUNT-1

STATEMENTS OF CHANGES IN CONTRACT OWNERS’ EQUITY, Continued

Years Ended December 31, 2009 and 2008

	FOSR					FVSS				FTVRDI				FTVSVI
	2009			2008		2009		2008		2009		2008		2009		2008
Investment activity:
Net investment income (loss)	$	25,332		40,968		(1,717	)	(443	)	55,632		105,385		70,464		51,842
Realized gain (loss) on investments		(143,550	)	(2,754	)	(450,832	)	(212,212	)	(1,942,531	)	(129,593	)	(564,534	)	69,290
Change in unrealized gain (loss) on investments		546,977		(1,367,448	)	1,138,724		(1,567,862	)	2,644,667		(2,473,157	)	1,638,428		(3,279,809	)
Reinvested capital gains		5,594		227,850		-		458,573		-		58,853		249,715		543,364
Net increase (decrease) in contract owners’ equity resulting from operations		434,353		(1,101,384	)	686,175		(1,321,944	)	757,768		(2,438,512	)	1,394,073		(2,615,313	)
Equity transactions:
Purchase payments received from contract owners		464,801		611,175		146,598		183,285		491,034		611,746		537,344		630,910
Transfers between funds (note 5)		91,255		36,333		335,201		(185,268	)	(601,332	)	(216,867	)	(129,009	)	(88,560	)
Surrenders and Death Benefits (note 3 and note 5)		(148,866	)	(80,450	)	(104,773	)	(63,563	)	(464,747	)	(652,260	)	(476,914	)	(429,292	)
Net policy repayments (loans) (note 4)		(4,955	)	(3,794	)	(50,011	)	(1,968	)	(88,351	)	(33,979	)	(17,053	)	(38,637	)
Redemptions to pay cost of insurance charges and administration charges (note 5)		(270,107	)	(215,072	)	(139,786	)	(131,623	)	(535,169	)	(590,194	)	(467,835	)	(477,891	)
Adjustments to maintain reserves		527		(1,558	)	821		-		(171	)	(119	)	262		(400	)
Net equity transactions		132,655		346,634		188,050		(199,137	)	(1,198,736	)	(881,673	)	(553,205	)	(403,870	)
Net change in contract owners’ equity		567,008		(754,750	)	874,225		(1,521,081	)	(440,968	)	(3,320,185	)	840,868		(3,019,183	)
Contract owners’ equity beginning of period		1,500,769		2,255,519		1,221,020		2,742,101		6,575,907		9,896,092		5,159,567		8,178,749
Contract owners’ equity end of period	$	2,067,777		1,500,769		2,095,245		1,221,020		6,134,939		6,575,907		6,000,435		5,159,567
CHANGES IN UNITS:
Beginning units		15,108		12,637		10,420		11,327		49,884		55,089		33,596		35,735
Units purchased		6,112		5,694		4,333		2,971		22,829		22,393		8,789		5,806
Units redeemed		(4,646	)	(3,223	)	(3,779	)	(3,878	)	(33,101	)	(27,598	)	(12,133	)	(7,945	)
Ending units		16,574		15,108		10,974		10,420		39,612		49,884		30,252		33,596

(Continued)

NATIONWIDE PROVIDENT VLI SEPARATE ACCOUNT-1

STATEMENTS OF CHANGES IN CONTRACT OWNERS’ EQUITY, Continued

Years Ended December 31, 2009 and 2008

	FTVDM3					TIF				FTVGI3				FTVFA2
	2009			2008		2009		2008		2009		2008		2009		2008
Investment activity:
Net investment income (loss)	$	59,840		43,738		35,826		31,877		264,341		44,469		170		10
Realized gain (loss) on investments		(382,300	)	(56,359	)	(54,880	)	86,409		39,365		40,437		(8	)	(32	)
Change in unrealized gain (loss) on investments		1,233,133		(1,853,307	)	362,182		(1,088,955	)	11,638		(28,153	)	426		(155	)
Reinvested capital gains		6,753		409,253		48,680		153,489		-		-		-		10
Net increase (decrease) in contract owners’ equity resulting from operations		917,426		(1,456,675	)	391,808		(817,180	)	315,344		56,753		588		(167	)
Equity transactions:
Purchase payments received from contract owners		211,629		275,966		50,382		61,999		100,282		68,866		948		186
Transfers between funds (note 5)		599,094		57,830		79,020		(59,073	)	317,327		693,660		7,162		418
Surrenders and Death Benefits (note 3 and note 5)		(123,149	)	(105,983	)	(47,961	)	(114,052	)	(131,326	)	(24,726	)	-		-
Net policy repayments (loans) (note 4)		(3,060	)	(18,076	)	(40,238	)	(3,211	)	(4,868	)	(19,427	)	-		-
Redemptions to pay cost of insurance charges and administration charges (note 5)		(161,971	)	(169,933	)	(113,120	)	(109,161	)	(126,258	)	(55,614	)	(966	)	(85	)
Adjustments to maintain reserves		(12	)	115		(393	)	153		(124	)	37		(35	)	(1	)
Net equity transactions		522,531		39,919		(72,310	)	(223,345	)	155,033		662,796		7,109		518
Net change in contract owners’ equity		1,439,957		(1,416,756	)	319,498		(1,040,525	)	470,377		719,549		7,697		351
Contract owners’ equity beginning of period		1,316,119		2,732,875		1,116,918		2,157,443		1,605,824		886,275		351		-
Contract owners’ equity end of period	$	2,756,076		1,316,119		1,436,416		1,116,918		2,076,201		1,605,824		8,048		351
CHANGES IN UNITS:
Beginning units		13,515		13,184		3,391		4,015		12,536		7,296		5		-
Units purchased		7,842		4,153		206		317		5,693		8,008		101		6
Units redeemed		(4,849	)	(3,822	)	(1,070	)	(941	)	(4,475	)	(2,768	)	(12	)	(1	)
Ending units		16,508		13,515		2,527		3,391		13,754		12,536		94		5

(Continued)

NATIONWIDE PROVIDENT VLI SEPARATE ACCOUNT-1

STATEMENTS OF CHANGES IN CONTRACT OWNERS’ EQUITY, Continued

Years Ended December 31, 2009 and 2008

	AMINS					AMCG				AMTP				AMRS
	2009			2008		2009		2008		2009		2008		2009		2008
Investment activity:
Net investment income (loss)	$	(1,555	)	(4,736	)	(4,675	)	(9,181	)	8,050		(34,788	)	(693	)	808
Realized gain (loss) on investments		(280,140	)	(37,830	)	(440,030	)	22,420		(10,537,066	)	5,638		(78,573	)	(5,029	)
Change in unrealized gain (loss) on investments		348,993		(302,774	)	602,613		(749,989	)	15,991,938		(21,414,996	)	123,212		(122,589	)
Reinvested capital gains		-		6		-		-		354,306		4,373,623		-		483
Net increase (decrease) in contract owners’ equity resulting from operations		67,298		(345,334	)	157,908		(736,750	)	5,817,228		(17,070,523	)	43,946		(126,327	)
Equity transactions:
Purchase payments received from contract owners		30,913		64,642		59,277		108,878		953,146		1,828,401		12,301		15,787
Transfers between funds (note 5)		(442,164	)	(322,996	)	(986,157	)	273,434		(15,397,031	)	284,713		(204,619	)	59,192
Surrenders and Death Benefits (note 3 and note 5)		(10,985	)	(25,675	)	(45,921	)	(27,001	)	(1,957,722	)	(2,489,797	)	-		(9,462	)
Net policy repayments (loans) (note 4)		(1,050	)	(2,904	)	(14,172	)	(15,939	)	37,822		(117,246	)	(275	)	(248	)
Redemptions to pay cost of insurance charges and administration charges (note 5)		(24,911	)	(42,638	)	(64,530	)	(90,181	)	(1,010,505	)	(1,679,426	)	(3,998	)	(6,603	)
Adjustments to maintain reserves		(97	)	(61	)	694		38		(314	)	(10,500	)	(13	)	10
Net equity transactions		(448,294	)	(329,632	)	(1,050,809	)	249,229		(17,374,604	)	(2,183,855	)	(196,604	)	58,676
Net change in contract owners’ equity		(380,996	)	(674,966	)	(892,901	)	(487,521	)	(11,557,376	)	(19,254,378	)	(152,658	)	(67,651	)
Contract owners’ equity beginning of period		382,454		1,057,420		1,051,885		1,539,406		15,082,866		34,337,244		152,658		220,309
Contract owners’ equity end of period	$	1,458		382,454		158,984		1,051,885		3,525,490		15,082,866		-		152,658
CHANGES IN UNITS:
Beginning units		4,896		7,201		6,626		5,229		129,860		138,527		2,174		1,683
Units purchased		470		1,612		622		2,437		10,552		20,476		198		714
Units redeemed		(5,351	)	(3,917	)	(7,045	)	(1,040	)	(134,876	)	(29,143	)	(2,372	)	(223	)
Ending units		15		4,896		203		6,626		5,536		129,860		-		2,174

(Continued)

NATIONWIDE PROVIDENT VLI SEPARATE ACCOUNT-1

STATEMENTS OF CHANGES IN CONTRACT OWNERS’ EQUITY, Continued

Years Ended December 31, 2009 and 2008

	AMFAS					AMSRS				OVGR				OVGS3
	2009			2008		2009		2008		2009		2008		2009		2008
Investment activity:
Net investment income (loss)	$	(4,103	)	(5,892	)	9,604		14,005		(13,667	)	(28,094	)	103,554		72,222
Realized gain (loss) on investments		(99,859	)	(18,619	)	(165,751	)	1,220		(158,759	)	40,929		(582,246	)	(111,490	)
Change in unrealized gain (loss) on investments		225,585		(402,045	)	311,912		(526,326	)	1,454,538		(2,752,212	)	2,635,266		(5,162,713	)
Reinvested capital gains		-		29,742		-		70,790		-		-		146,585		609,654
Net increase (decrease) in contract owners’ equity resulting from operations		121,623		(396,814	)	155,765		(440,311	)	1,282,112		(2,739,377	)	2,303,159		(4,592,327	)
Equity transactions:
Purchase payments received from contract owners		58,708		80,962		58,640		67,273		580,851		782,165		1,159,071		1,532,011
Transfers between funds (note 5)		4,602		24,486		(132,990	)	71,840		(351,253	)	34,369		(576,451	)	116,745
Surrenders and Death Benefits (note 3 and note 5)		(81,283	)	(67,817	)	(51,911	)	(59,250	)	(532,246	)	(625,932	)	(738,977	)	(916,560	)
Net policy repayments (loans) (note 4)		762		(3,750	)	(1,459	)	(3,861	)	(35,177	)	(18,268	)	(102,675	)	10,380
Redemptions to pay cost of insurance charges and administration charges (note 5)		(69,343	)	(68,752	)	(44,771	)	(56,462	)	(456,920	)	(451,406	)	(743,514	)	(770,099	)
Adjustments to maintain reserves		1,191		(3,000	)	172		37		89		(300	)	862		(999	)
Net equity transactions		(85,363	)	(37,871	)	(172,319	)	19,577		(794,656	)	(279,372	)	(1,001,684	)	(28,522	)
Net change in contract owners’ equity		36,260		(434,685	)	(16,554	)	(420,734	)	487,456		(3,018,749	)	1,301,475		(4,620,849	)
Contract owners’ equity beginning of period		605,946		1,040,631		679,510		1,100,244		3,148,779		6,167,528		6,469,687		11,090,536
Contract owners’ equity end of period	$	642,206		605,946		662,956		679,510		3,636,235		3,148,779		7,771,162		6,469,687
CHANGES IN UNITS:
Beginning units		5,711		6,024		5,980		5,851		39,286		41,017		67,077		68,253
Units purchased		1,016		1,303		649		1,307		7,418		11,251		13,352		17,060
Units redeemed		(1,952	)	(1,616	)	(2,717	)	(1,178	)	(15,463	)	(12,982	)	(22,328	)	(18,236	)
Ending units		4,775		5,711		3,912		5,980		31,241		39,286		58,101		67,077

(Continued)

NATIONWIDE PROVIDENT VLI SEPARATE ACCOUNT-1

STATEMENTS OF CHANGES IN CONTRACT OWNERS’ EQUITY, Continued

Years Ended December 31, 2009 and 2008

	OVGS					OVHI3				OVHI				OVGI
	2009			2008		2009		2008		2009		2008		2009		2008
Investment activity:
Net investment income (loss)	$	27,139		21,098		(1,422	)	16,891		(922	)	39,394		24,719		26,473
Realized gain (loss) on investments		(151,404	)	44,622		(152,217	)	(15,855	)	(383,066	)	(93,042	)	(161,691	)	49,839
Change in unrealized gain (loss) on investments		583,615		(1,394,219	)	201,130		(299,041	)	415,214		(461,537	)	653,458		(1,662,210	)
Reinvested capital gains		35,390		160,791		-		-		-		-		-		208,418
Net increase (decrease) in contract owners’ equity resulting from operations		494,740		(1,167,708	)	47,491		(298,005	)	31,226		(515,185	)	516,486		(1,377,480	)
Equity transactions:
Purchase payments received from contract owners		57,096		60,665		93,157		114,889		18,933		11,142		288,818		365,406
Transfers between funds (note 5)		(253,113	)	(106,225	)	(20,030	)	106,093		(9,275	)	(44,093	)	(238,119	)	(166,631	)
Surrenders and Death Benefits (note 3 and note 5)		(117,533	)	(98,989	)	(9,729	)	(8,662	)	(17,299	)	(19,707	)	(131,480	)	(300,707	)
Net policy repayments (loans) (note 4)		1,756		18,715		241		(7,391	)	8,213		(1,782	)	(1,940	)	(1,825	)
Redemptions to pay cost of insurance charges and administration charges (note 5)		(115,915	)	(135,371	)	(19,252	)	(15,312	)	(41,553	)	(57,508	)	(212,892	)	(249,122	)
Adjustments to maintain reserves		(805	)	-		57		392		33		8		(488	)	(1,100	)
Net equity transactions		(428,514	)	(261,205	)	44,444		190,009		(40,948	)	(111,940	)	(296,101	)	(353,979	)
Net change in contract owners’ equity		66,226		(1,428,913	)	91,935		(107,996	)	(9,722	)	(627,125	)	220,385		(1,731,459	)
Contract owners’ equity beginning of period		1,626,364		3,055,277		163,198		271,194		130,648		757,773		2,104,570		3,836,029
Contract owners’ equity end of period	$	1,692,590		1,626,364		255,133		163,198		120,926		130,648		2,324,955		2,104,570
CHANGES IN UNITS:
Beginning units		7,895		9,126		8,100		2,821		3,768		4,957		22,083		24,468
Units purchased		176		489		4,581		5,915		517		335		3,954		4,703
Units redeemed		(3,194	)	(1,720	)	(2,619	)	(636	)	(1,998	)	(1,524	)	(7,038	)	(7,088	)
Ending units		4,877		7,895		10,062		8,100		2,287		3,768		18,999		22,083

(Continued)

NATIONWIDE PROVIDENT VLI SEPARATE ACCOUNT-1

STATEMENTS OF CHANGES IN CONTRACT OWNERS’ EQUITY, Continued

Years Ended December 31, 2009 and 2008

	OVSC					PMVFBA			PMVLDA			PVGIB
	2009			2008		2009		2008	2009		2008	2009		2008
Investment activity:
Net investment income (loss)	$	3,619		(3,847	)	119		-	975		-	2,971		4,448
Realized gain (loss) on investments		(260,723	)	(92,122	)	509		-	440		-	(133,664	)	(72,634	)
Change in unrealized gain (loss) on investments		692,310		(966,397	)	(3,785	)	-	(2,105	)	-	162,404		(135,106	)
Reinvested capital gains		-		119,749		980		-	5,353		-	-		56,667
Net increase (decrease) in contract owners’ equity resulting from operations		435,206		(942,617	)	(2,177	)	-	4,663		-	31,711		(146,625	)
Equity transactions:
Purchase payments received from contract owners		123,681		177,137		564		-	2,576		-	26,889		35,429
Transfers between funds (note 5)		(83,497	)	(128,578	)	101,173		-	139,583		-	(40,264	)	(23,539	)
Surrenders and Death Benefits (note 3 and note 5)		(204,629	)	(140,085	)	-		-	-		-	(39,256	)	(48,389	)
Net policy repayments (loans) (note 4)		(59,077	)	(7,635	)	-		-	-		-	3,051		76
Redemptions to pay cost of insurance charges and administration charges (note 5)		(121,767	)	(134,009	)	(835	)	-	(2,565	)	-	(24,716	)	(23,230	)
Adjustments to maintain reserves		(348	)	9		(9,479	)	-	(6,220	)	-	(193	)	12
Net equity transactions		(345,637	)	(233,161	)	91,423		-	133,374		-	(74,489	)	(59,641	)
Net change in contract owners’ equity		89,569		(1,175,778	)	89,246		-	138,037		-	(42,778	)	(206,266	)
Contract owners’ equity beginning of period		1,379,569		2,555,347		-		-	-		-	198,497		404,763
Contract owners’ equity end of period	$	1,469,138		1,379,569		89,246		-	138,037		-	155,719		198,497
CHANGES IN UNITS:
Beginning units		10,063		11,379		-		-	-		-	2,001		2,406
Units purchased		1,384		2,419		958		-	1,357		-	321		480
Units redeemed		(3,881	)	(3,735	)	(140	)	-	(101	)	-	(1,032	)	(885	)
Ending units		7,566		10,063		818		-	1,256		-	1,290		2,001

(Continued)

NATIONWIDE PROVIDENT VLI SEPARATE ACCOUNT-1

STATEMENTS OF CHANGES IN CONTRACT OWNERS’ EQUITY, Continued

Years Ended December 31, 2009 and 2008

	PVTIGB					PVTVB				TRBCG2				TREI2
	2009			2008		2009		2008		2009		2008		2009		2008
Investment activity:
Net investment income (loss)	$	(851	)	3,427		(318	)	(2,912	)	(7,241	)	(9,870	)	17,495		30,824
Realized gain (loss) on investments		(147,374	)	5,531		14,993		(2,492	)	(152,789	)	54,025		(234,025	)	(170,548	)
Change in unrealized gain (loss) on investments		162,646		(173,933	)	232,435		(184,450	)	506,172		(846,757	)	632,712		(892,360	)
Reinvested capital gains		-		38,191		-		-		-		-		-		61,487
Net increase (decrease) in contract owners’ equity resulting from operations		14,421		(126,784	)	247,110		(189,854	)	346,142		(802,602	)	416,182		(970,597	)
Equity transactions:
Purchase payments received from contract owners		4,126		6,579		24,802		27,995		124,766		149,164		232,141		212,682
Transfers between funds (note 5)		(28,451	)	8,700		605,761		(12,541	)	(91,202	)	123,251		6,614		276,812
Surrenders and Death Benefits (note 3 and note 5)		(40,764	)	(42	)	(19,544	)	(5,875	)	(154,763	)	(521,734	)	(136,910	)	(205,175	)
Net policy repayments (loans) (note 4)		90		372		(28,049	)	16,150		4,315		(1,759	)	248		(3,759	)
Redemptions to pay cost of insurance charges and administration charges (note 5)		(11,254	)	(8,575	)	(29,872	)	(23,044	)	(110,175	)	(102,216	)	(158,559	)	(226,200	)
Adjustments to maintain reserves		(728	)	-		(580	)	-		35		90		(131	)	(11	)
Net equity transactions		(76,981	)	7,034		552,518		2,685		(227,024	)	(353,204	)	(56,597	)	54,349
Net change in contract owners’ equity		(62,560	)	(119,750	)	799,628		(187,169	)	119,118		(1,155,806	)	359,585		(916,248	)
Contract owners’ equity beginning of period		170,324		290,074		307,741		494,910		1,037,913		2,193,719		1,520,540		2,436,788
Contract owners’ equity end of period	$	107,764		170,324		1,107,369		307,741		1,157,031		1,037,913		1,880,125		1,520,540
CHANGES IN UNITS:
Beginning units		524		560		3,194		3,387		13,346		16,056		18,840		19,103
Units purchased		39		35		1,860		343		2,563		4,328		5,770		6,979
Units redeemed		(180	)	(71	)	(882	)	(536	)	(5,338	)	(7,038	)	(5,873	)	(7,242	)
Ending units		383		524		4,172		3,194		10,571		13,346		18,737		18,840

(Continued)

NATIONWIDE PROVIDENT VLI SEPARATE ACCOUNT-1

STATEMENTS OF CHANGES IN CONTRACT OWNERS’ EQUITY, Continued

Years Ended December 31, 2009 and 2008

	TRLT2					VWBFR				VWBF				VWEMR
	2009			2008		2009		2008		2009		2008		2009		2008
Investment activity:
Net investment income (loss)	$	19,285		25,690		148,144		337,914		130,037		378,541		(55,367	)	(95,435	)
Realized gain (loss) on investments		15,065		3,689		(34,784	)	(130,456	)	(101,414	)	(89,707	)	(3,842,379	)	(831,695	)
Change in unrealized gain (loss) on investments		30,188		(35,641	)	88,366		(118,888	)	169,592		(184,764	)	11,037,270		(18,622,806	)
Reinvested capital gains		-		-		-		-		-		-		700,045		6,953,440
Net increase (decrease) in contract owners’ equity resulting from operations		64,538		(6,262	)	201,726		88,570		198,215		104,070		7,839,569		(12,596,496	)
Equity transactions:
Purchase payments received from contract owners		43,952		38,563		620,160		528,604		57,152		83,870		1,572,020		1,448,315
Transfers between funds (note 5)		(1,116,619	)	759,317		20,775		1,082,751		70,370		134,478		(751,009	)	410,895
Surrenders and Death Benefits (note 3 and note 5)		(45,633	)	(3,882	)	(477,913	)	(393,466	)	(474,748	)	(375,485	)	(1,190,646	)	(1,083,524	)
Net policy repayments (loans) (note 4)		(25,877	)	(1,366	)	(20,922	)	(43,693	)	(6,473	)	(71,204	)	(58,412	)	(80,164	)
Redemptions to pay cost of insurance charges and administration charges (note 5)		(60,552	)	(49,340	)	(344,767	)	(327,177	)	(298,806	)	(294,777	)	(763,750	)	(687,569	)
Adjustments to maintain reserves		64		(68	)	(2,942	)	3,121		(2,256	)	(4,200	)	(21,663	)	24,768
Net equity transactions		(1,204,665	)	743,224		(205,609	)	850,140		(654,761	)	(527,318	)	(1,213,460	)	32,721
Net change in contract owners’ equity		(1,140,127	)	736,962		(3,883	)	938,710		(456,546	)	(423,248	)	6,626,109		(12,563,775	)
Contract owners’ equity beginning of period		1,140,127		403,165		4,954,047		4,015,337		4,381,321		4,804,569		7,283,105		19,846,880
Contract owners’ equity end of period	$	-		1,140,127		4,950,164		4,954,047		3,924,775		4,381,321		13,909,214		7,283,105
CHANGES IN UNITS:
Beginning units		10,415		3,708		28,883		26,479		10,846		13,677		53,636		49,551
Units purchased		2,989		9,371		10,478		15,686		584		1,224		13,969		18,095
Units redeemed		(13,404	)	(2,664	)	(12,525	)	(13,282	)	(2,540	)	(4,055	)	(21,555	)	(14,010	)
Ending units		-		10,415		26,836		28,883		8,890		10,846		46,050		53,636

(Continued)

NATIONWIDE PROVIDENT VLI SEPARATE ACCOUNT-1

STATEMENTS OF CHANGES IN CONTRACT OWNERS’ EQUITY, Continued

Years Ended December 31, 2009 and 2008

	VWEM					VWHAR				VWHA				VWRER
	2009			2008		2009		2008		2009		2008		2009		2008
Investment activity:
Net investment income (loss)	$	(62,903	)	(137,700	)	(33,694	)	(35,924	)	(22,486	)	(29,502	)	(20,178	)	236,666
Realized gain (loss) on investments		(1,586,007	)	959,050		(559,243	)	464,091		295,457		1,317,212		(2,986,959	)	(480,291	)
Change in unrealized gain (loss) on investments		10,502,504		(31,033,531	)	4,074,484		(7,581,132	)	2,353,093		(7,099,470	)	4,155,367		(4,064,659	)
Reinvested capital gains		910,472		11,018,409		38,766		1,642,405		30,961		1,448,943		-		871,777
Net increase (decrease) in contract owners’ equity resulting from operations		9,764,066		(19,193,772	)	3,520,313		(5,510,560	)	2,657,025		(4,362,817	)	1,148,230		(3,436,507	)
Equity transactions:
Purchase payments received from contract owners		41,276		157,058		891,320		652,260		65,588		120,247		(549,215	)	494,473
Transfers between funds (note 5)		(142,351	)	(1,247,154	)	774,419		1,248,621		(374,411	)	402,260		(2,895,883	)	(109,436	)
Surrenders and Death Benefits (note 3 and note 5)		(1,374,611	)	(1,474,381	)	(607,881	)	(612,796	)	(533,021	)	(561,244	)	(272,309	)	(330,116	)
Net policy repayments (loans) (note 4)		(51,793	)	197,589		(51,367	)	(126,024	)	132,290		(85,290	)	(712	)	(43,772	)
Redemptions to pay cost of insurance charges and administration charges (note 5)		(752,531	)	(887,750	)	(492,767	)	(490,673	)	(380,710	)	(306,496	)	(301,212	)	(323,014	)
Adjustments to maintain reserves		(755	)	7,000		(22,030	)	(11,310	)	(32	)	2,500		3,214		(1,178	)
Net equity transactions		(2,280,765	)	(3,247,638	)	491,694		660,078		(1,090,296	)	(428,023	)	(4,016,117	)	(313,043	)
Net change in contract owners’ equity		7,483,301		(22,441,410	)	4,012,007		(4,850,482	)	1,566,729		(4,790,840	)	(2,867,887	)	(3,749,550	)
Contract owners’ equity beginning of period		9,585,754		32,027,164		6,301,428		11,151,910		5,007,996		9,798,836		2,867,887		6,617,437
Contract owners’ equity end of period	$	17,069,055		9,585,754		10,313,435		6,301,428		6,574,725		5,007,996		-		2,867,887
CHANGES IN UNITS:
Beginning units		46,592		56,497		26,325		24,100		9,861		11,498		24,291		24,320
Units purchased		1,445		1,232		11,656		11,063		945		1,585		5,409		6,147
Units redeemed		(11,113	)	(11,137	)	(10,326	)	(8,838	)	(2,086	)	(3,222	)	(29,700	)	(6,176	)
Ending units		36,924		46,592		27,655		26,325		8,720		9,861		-		24,291

(Continued)

NATIONWIDE PROVIDENT VLI SEPARATE ACCOUNT-1

STATEMENTS OF CHANGES IN CONTRACT OWNERS’ EQUITY, Continued

Years Ended December 31, 2009 and 2008

	VVEI					VVHYB				VVMCI				VVHGB
	2009			2008		2009		2008		2009		2008		2009		2008
Investment activity:
Net investment income (loss)	$	61,095		50,926		63,270		57,161		19,039		17,772		42,878		44,017
Realized gain (loss) on investments		(231,423	)	(87,453	)	(47,977	)	(32,776	)	(392,407	)	(47,396	)	10,513		19,492
Change in unrealized gain (loss) on investments		420,696		(830,777	)	266,731		(232,873	)	1,121,431		(1,787,412	)	6,489		(7,260	)
Reinvested capital gains		4,402		174,240		-		-		105,182		389,966		-		-
Net increase (decrease) in contract owners’ equity resulting from operations		254,770		(693,064	)	282,024		(208,488	)	853,245		(1,427,070	)	59,880		56,249
Equity transactions:
Purchase payments received from contract owners		324,468		466,476		209,900		280,841		585,884		806,264		221,943		300,583
Transfers between funds (note 5)		40,126		(26,603	)	8,753		(33,763	)	(100,222	)	49,190		129,383		45,771
Surrenders and Death Benefits (note 3 and note 5)		(256,702	)	(216,457	)	(61,666	)	(42,048	)	(276,131	)	(209,292	)	(164,629	)	(336,834	)
Net policy repayments (loans) (note 4)		(2,827	)	(7,983	)	(2,023	)	(3,880	)	(11,863	)	(1,748	)	(8,893	)	(798	)
Redemptions to pay cost of insurance charges and administration charges (note 5)		(283,993	)	(235,503	)	(114,845	)	(98,317	)	(388,079	)	(331,251	)	(167,122	)	(156,349	)
Adjustments to maintain reserves		179		-		158		-		109		(435	)	34		-
Net equity transactions		(178,749	)	(20,070	)	40,277		102,833		(190,302	)	312,728		10,716		(147,627	)
Net change in contract owners’ equity		76,021		(713,134	)	322,301		(105,655	)	662,943		(1,114,342	)	70,596		(91,378	)
Contract owners’ equity beginning of period		1,490,598		2,203,732		730,689		836,344		2,113,587		3,227,929		1,146,739		1,238,117
Contract owners’ equity end of period	$	1,566,619		1,490,598		1,052,990		730,689		2,776,530		2,113,587		1,217,335		1,146,739
CHANGES IN UNITS:
Beginning units		12,814		12,966		6,995		6,190		17,877		15,734		9,239		10,397
Units purchased		3,451		3,630		2,286		2,664		4,857		5,934		3,378		5,075
Units redeemed		(4,622	)	(3,782	)	(1,952	)	(1,859	)	(5,844	)	(3,791	)	(3,271	)	(6,233	)
Ending units		11,643		12,814		7,329		6,995		16,890		17,877		9,346		9,239

(Continued)

NATIONWIDE PROVIDENT VLI SEPARATE ACCOUNT-1

STATEMENTS OF CHANGES IN CONTRACT OWNERS’ EQUITY, Continued

Years Ended December 31, 2009 and 2008

	WRASP				SVDF				SVOF				WFVSCG
	2009			2008	2009		2008		2009		2008		2009		2008
Investment activity:
Net investment income (loss)	$	(193	)	-	(28,529	)	(67,846	)	(21,967	)	79,064		(76	)	-
Realized gain (loss) on investments		268		-	(32,175	)	420,932		(2,677,913	)	302,176		709		-
Change in unrealized gain (loss) on investments		726		-	1,392,408		(5,354,863	)	4,051,946		(5,037,566	)	1,244		-
Reinvested capital gains		-		-	-		-		-		1,499,772		-		-
Net increase (decrease) in contract owners’ equity resulting from operations		801		-	1,331,704		(5,001,777	)	1,352,066		(3,156,554	)	1,877		-
Equity transactions:
Purchase payments received from contract owners		116		-	522,663		880,013		315,037		584,346		753		-
Transfers between funds (note 5)		157,930		-	(6,416,856	)	(268,238	)	(5,139,491	)	(191,427	)	41,911		-
Surrenders and Death Benefits (note 3 and note 5)		-		-	(497,201	)	(624,152	)	(200,077	)	(792,115	)	-		-
Net policy repayments (loans) (note 4)		-		-	(3,235	)	(26,891	)	(8,213	)	(7,855	)	-		-
Redemptions to pay cost of insurance charges and administration charges (note 5)		(2,008	)	-	(411,174	)	(696,710	)	(326,728	)	(531,179	)	(773	)	-
Adjustments to maintain reserves		1,747		-	(2,928	)	4,304		(16	)	(2,000	)	(26	)	-
Net equity transactions		157,785		-	(6,808,731	)	(731,674	)	(5,359,488	)	(940,230	)	41,865		-
Net change in contract owners’ equity		158,586		-	(5,477,027	)	(5,733,451	)	(4,007,422	)	(4,096,784	)	43,742		-
Contract owners’ equity beginning of period		-		-	6,135,522		11,868,973		4,557,744		8,654,528		-		-
Contract owners’ equity end of period	$	158,586		-	658,495		6,135,522		550,322		4,557,744		43,742		-
CHANGES IN UNITS:
Beginning units		-		-	124,354		133,855		51,776		58,374		-		-
Units purchased		1,380		-	11,836		18,634		3,839		7,526		756		-
Units redeemed		(48	)	-	(132,834	)	(28,135	)	(54,137	)	(14,124	)	(423	)	-
Ending units		1,332		-	3,356		124,354		1,478		51,776		333		-

(Continued)

NATIONWIDE PROVIDENT VLI SEPARATE ACCOUNT-1

STATEMENTS OF CHANGES IN CONTRACT OWNERS’ EQUITY, Continued

Years Ended December 31, 2009 and 2008

	BF4					SGRF4				VWRE
	2009			2008		2009		2008		2009		2008
Investment activity:
Net investment income (loss)	$	150,192		705,267		(70,289	)	(361,399	)	(10,798	)	165,858
Realized gain (loss) on investments		(11,938,236	)	(702,560	)	(4,726,698	)	1,558,939		(1,864,095	)	(83,360	)
Change in unrealized gain (loss) on investments		11,216,817		(13,669,021	)	6,214,892		(33,517,392	)	2,500,409		(2,995,575	)
Reinvested capital gains		-		3,831,314		-		-		-		606,814
Net increase (decrease) in contract owners’ equity resulting from operations		(571,227	)	(9,835,000	)	1,417,905		(32,319,852	)	625,516		(2,306,263	)
Equity transactions:
Purchase payments received from contract owners		(12,591,851	)	2,143,720		(9,433,163	)	3,788,733		(110,069	)	36,715
Transfers between funds (note 5)		(12,001,624	)	(452,063	)	(26,598,631	)	(584,559	)	(1,847,227	)	(317,895	)
Surrenders and Death Benefits (note 3 and note 5)		(614,326	)	(2,586,154	)	(657,489	)	(4,284,706	)	(196,776	)	(159,913	)
Net policy repayments (loans) (note 4)		69,801		233,922		34,173		37,947		3,179		9,483
Redemptions to pay cost of insurance charges and administration charges (note 5)		(738,520	)	(2,322,822	)	(937,006	)	(3,241,377	)	(145,821	)	(188,338	)
Adjustments to maintain reserves		(76,563	)	14,500		(47,881	)	(14,000	)	(8,127	)	(14,500	)
Net equity transactions		(25,953,083	)	(2,968,897	)	(37,639,997	)	(4,297,962	)	(2,304,841	)	(634,448	)
Net change in contract owners’ equity		(26,524,310	)	(12,803,897	)	(36,222,092	)	(36,617,814	)	(1,679,325	)	(2,940,711	)
Contract owners’ equity beginning of period		26,524,310		39,328,207		36,222,092		72,839,906		1,690,063		4,630,774
Contract owners’ equity end of period	$	-		26,524,310		-		36,222,092		10,738		1,690,063
CHANGES IN UNITS:
Beginning units		48,504		54,224		83,922		90,685		9,119		11,517
Units purchased		2,367		6,642		3,675		11,798		180		287
Units redeemed		(50,871	)	(12,362	)	(87,597	)	(18,561	)	(9,299	)	(2,685	)
Ending units		-		48,504		-		83,922		-		9,119

See accompanying notes to financial statements.

The Nationwide Provident VLI Separate Account 1

Notes to Financial Statements

December 31, 2009 and 2008

(1) Organization

The Nationwide Provident VLI Separate Account 1 (Separate Account) was established by Nationwide Life Insurance Company of America (Nationwide Provident) under the provisions of the Pennsylvania Insurance Law. The Separate Account is a separate investment account to which assets are allocated to support the benefits payable under single premium, modified premium, scheduled premium and flexible premium adjustable variable life insurance policies (the Policies). The Nationwide NVIT Nationwide Fund Class IV, Nationwide NVIT Money Market Fund Class IV, Nationwide NVIT Government Bond Fund Class IV and J.P. Morgan NVIT Balanced Fund Class IV subaccounts are the only subaccounts available with single premium and scheduled premium policies.

On December 31, 2009 NLICA merged with Nationwide Life and Insurance Company (NLIC or the Company) with NLIC as the surviving entity.

With certain exceptions, contract owners in either the accumulation or the payout phase may invest in the following:

ALGER AMERICAN FUNDS

SmallCap Growth Portfolio - Class O Shares (AASCO)

BLACKROCK FUNDS

Variable Series Funds, Inc. - Global Allocation V.I. Fund - Class II (MLVGA2)

JANUS FUNDS

Janus Aspen Series - Balanced Portfolio-Service Shares (JABS)

Janus Aspen Series - Forty Portfolio-Service Shares (JACAS)

Janus Aspen Series - Global Technology Portfolio-Service II Shares (JAGTS2)

Janus Aspen Series - Global Technology Portfolio-Service Shares (JAGTS)

Janus Aspen Series - INTECH Risk-Managed Core Portfolio-Service Shares (JARLCS)

Janus Aspen Series - Overseas Portfolio-Service II Shares (JAIGS2)

Janus Aspen Series - Overseas Portfolio-Service Shares (JAIGS)

MASSACHUSETTS FINANCIAL SERVICES CO.

Investors Growth Stock Series - Initial Class (MIGIC)

Value Series - Initial Class (MVFIC)

MORGAN STANLEY

Core Plus Fixed Income Portfolio - Class I (MSVFI)

Emerging Markets Debt Portfolio - Class I (MSEM)

U.S. Real Estate Portfolio - Class I (MSVRE)

NATIONWIDE FUNDS GROUP

AllianceBernstein NVIT Global Fixed Income Fund - Class III (NVAGF3)

AllianceBernstein NVIT Global Fixed Income Fund - Class VI (NVAGF6)

American Century NVIT Multi Cap Value Fund - Class I (NVAMV1)

American Funds NVIT Asset Allocation Fund - Class II (GVAAA2)

American Funds NVIT Bond Fund - Class II (GVABD2)

American Funds NVIT Global Growth Fund - Class II (GVAGG2)

American Funds NVIT Growth Fund - Class II (GVAGR2)

American Funds NVIT Growth-Income Fund - Class II (GVAGI2)

Federated NVIT High Income Bond Fund - Class I (HIBF)

Federated NVIT High Income Bond Fund - Class III (HIBF3)

Gartmore NVIT Emerging Markets Fund - Class I (GEM)

Gartmore NVIT Emerging Markets Fund - Class III (GEM3)

Gartmore NVIT Global Utilities Fund - Class I (GVGU1)

Gartmore NVIT Global Utilities Fund - Class III (GVGU)

Gartmore NVIT International Equity Fund - Class VI (NVIE6)

Gartmore NVIT Worldwide Leaders Fund - Class III (GEF3)*

Neuberger Berman NVIT Multi Cap Opportunities Fund - Class I (NVNMO1)

Neuberger Berman NVIT Socially Responsible Fund - Class II (NVNSR2)

NVIT Cardinal Aggressive Fund - Class I (NVCRA1)

NVIT Cardinal Balanced Fund - Class I (NVCRB1)

NVIT Cardinal Capital Appreciation Fund - Class I (NVCCA1)

NVIT Cardinal Conservative Fund - Class I (NVCCN1)

NVIT Cardinal Moderate Fund - Class I (NVCMD1)

NVIT Cardinal Moderately Aggressive Fund - Class I (NVCMA1)

NVIT Cardinal Moderately Conservative Fund - Class I (NVCMC1)

NVIT Core Bond Fund - Class I (NVCBD1)

NVIT Core Plus Bond Fund - Class I (NVLCP1)

NVIT Fund-Class IV (TRF4)

NVIT Global Financial Services Fund - Class I (GVGF1)

NVIT Global Financial Services Fund - Class III (GVGFS)

NVIT Government Bond Fund - Class I (GBF)

NVIT Government Bond Fund - Class IV (GBF4)

NVIT Growth Fund - Class IV (CAF4)

NVIT Health Sciences Fund - Class I (GVGH1)

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The Nationwide Provident VLI Separate Account 1 Notes to Financial Statements

NVIT Health Sciences Fund - Class III (GVGHS)

NVIT Investor Destinations Aggressive Fund - Class II (GVIDA)

NVIT Investor Destinations Balanced Fund - Class II (NVDBL2)*

NVIT Investor Destinations Capital Appreciation Fund - Class II (NVDCA2)

NVIT Investor Destinations Conservative Fund - Class II (GVIDC)

NVIT Investor Destinations Moderate Fund - Class II (GVIDM)

NVIT Investor Destinations Moderately Aggressive Fund - Class II (GVDMA)

NVIT Investor Destinations Moderately Conservative Fund - Class II (GVDMC)

NVIT Mid Cap Index Fund - Class I (MCIF)

NVIT Multi - Manager International Growth Fund - Class III (NVMIG3)

NVIT Multi - Manager International Value Fund - Class III (GVDIV3)

NVIT Multi - Manager International Value Fund - Class IV (GVDIV4)

NVIT Multi - Manager Large Cap Growth Fund - Class I (NVMLG1)

NVIT Multi - Manager Large Cap Value Fund - Class I (NVMLV1)

NVIT Multi - Manager Mid Cap Growth Fund - Class I (NVMMG1)

NVIT Multi - Manager Mid Cap Value Fund - Class II (NVMMV2)

NVIT Multi - Manager Small Cap Growth Fund - Class I (SCGF)

NVIT Multi - Manager Small Cap Value Fund - Class IV (SCVF4)

NVIT Multi - Manager Small Company Fund - Class IV (SCF4)

NVIT Multi - Sector Bond Fund - Class I (MSBF)

NVIT S&P 500 Index Fund - Class IV (GVEX4)

NVIT Short Term Bond Fund - Class II (NVSTB2)

NVIT Technology & Communications Fund - Class I (GGTC)

NVIT Technology & Communications Fund - Class III (GGTC3)

NVIT U.S. Growth Leaders Fund - Class I (GVUG1)

Oppenheimer NVIT Large Cap Growth Fund - Class I (NVOLG1)

Templeton NVIT International Value Fund - Class III (NVTIV3)

Van Kampen NVIT Comstock Value Fund - Class IV (EIF4)

Van Kampen NVIT Real Estate Fund - Class I (NVRE1)

VaNVIT Money Market Fund - Class IV (SAM4)

NEUBERGER & BERMAN MANAGEMENT, INC.

Advisers Management Trust - Short Duration Bond Portfolio - I Class Shares (AMTB)

Portfolios of the AIM Variable Insurance Funds

V.I. Basic Value Fund - Series I (AVBVI)

V.I. Capital Appreciation Fund - Series I (AVCA)

V.I. Capital Development Fund - Series I (AVCDI)

Portfolios of the AllianceBernstein Variable Products Series Fund, Inc.

VPS Growth and Income Portfolio - Class A (ALVGIA)

VPS Small/Mid Cap Value Portfolio: Class A (ALVSVA)

Portfolios of the American Century Variable Portfolios, Inc.

VP Income & Growth Fund - Class I (ACVIG)

VP Inflation Protection Fund - Class II (ACVIP2)

VP International Fund - Class I (ACVI)

VP International Fund - Class III (ACVI3) *

VP Mid Cap Value Fund - Class I (ACVMV1)

VP Ultra(R) Fund - Class I (ACVU1)

VP Value Fund - Class I (ACVV)

VP Vista(SM) Fund - Class I (ACVVS1)

Portfolios of the Dreyfus Investment Portfolios

Small Cap Stock Index Portfolio - Service Shares (DVSCS)

Stock Index Fund, Inc. - Initial Shares (DSIF)

Portfolios of the Dreyfus Variable Investment Fund

Appreciation Portfolio - Initial Shares (DCAP)

Developing Leaders Portfolio - Initial Shares (DSC)

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The Nationwide Provident VLI Separate Account 1 Notes to Financial Statements

Portfolios of the Federated Insurance Series

Capital Appreciation Fund II - Primary Shares (FVCA2P)

Clover Value Fund II - Primary Shares (FALF)

Quality Bond Fund II - Primary Shares (FQB)

Portfolios of the Fidelity Variable Insurance Products Fund Fidelity

Equity - Income Portfolio - Initial Class (FEIP)

High Income Portfolio - Initial Class (FHIP)

VIP Fund - Asset Manager Portfolio - Initial Class (FAMP)

VIP Fund - Contrafund Portfolio - Initial Class (FCP)

VIP Fund - Energy Portfolio - Service Class 2 (FNRS2)

VIP Fund - Equity - Income Portfolio - Service Class (FEIS)

VIP Fund - Freedom Fund 2010 Portfolio - Service Class (FF10S)

VIP Fund - Freedom Fund 2020 Portfolio - Service Class (FF20S)

VIP Fund - Freedom Fund 2030 Portfolio - Service Class (FF30S)

VIP Fund - Growth Portfolio - Initial Class (FGP)

VIP Fund - Growth Portfolio - Service Class (FGS)

VIP Fund - High Income Portfolio - Initial Class R (FHIPR)

VIP Fund - Investment Grade Bond Portfolio - Initial Class (FIGBP)

VIP Fund - Investment Grade Bond Portfolio - Service Class (FIGBS)

VIP Fund - Mid Cap Portfolio - Service Class (FMCS)

VIP Fund - Overseas Portfolio - Initial Class (FOP)

VIP Fund - Overseas Portfolio - Initial Class R (FOPR)

VIP Fund - Overseas Portfolio - Service Class (FOS)

VIP Fund - Overseas Portfolio - Service Class R (FOSR)

VIP Fund - Value Strategies Portfolio - Service Class (FVSS)

Portfolios of the Franklin Templeton Variable Insurance Products Trust

Franklin Rising Dividends Securities Fund - Class 1 (FTVRDI)

Franklin Small Cap Value Securities Fund - Class 1 (FTVSVI)

Templeton Developing Markets Securities Fund - Class 3 (FTVDM3)

Templeton Foreign Securities Fund - Class 1 (TIF)

Templeton Global Bond Securities Fund - Class 3 (FTVGI3)

VIP Founding Funds Allocation Fund - Class 2 (FTVFA2)

Portfolios of the Neuberger Berman Advisers Management Trust

International Portfolio - S Class Shares (AMINS)

Mid - Cap Growth Portfolio - I Class Shares (AMCG)

Partners Portfolio - I Class Shares (AMTP)

Regency Portfolio - S Class Shares (AMRS)*

Small - Cap Growth Portfolio - S Class Shares (AMFAS)

Socially Responsive Portfolio - I Class Shares (AMSRS)

Portfolios of the Oppenheimer Variable Account Funds

Capital Appreciation Fund/VA - Non-Service Shares (OVGR)

Global Securities Fund/VA - Class 3 (OVGS3)

Global Securities Fund/VA - Non-Service Shares (OVGS)

High Income Fund/VA - Class 3 (OVHI3)

High Income Fund/VA - Non-Service Shares (OVHI)

Main Street Fund(R)/VA - Non-Service Shares (OVGI)

Main Street Small Cap Fund(R)/VA - Non-Service Shares (OVSC)

Portfolios of the PIMCO Variable Insurance Trust

Foreign Bond Portfolio (Unhedged) - Administrative Class (PMVFBA)

Low Duration Portfolio - Administrative Class (PMVLDA)

Portfolios of the Putnam Variable Trust

Putnam VT Growth and Income Fund - IB Shares (PVGIB)

Putnam VT International Equity Fund - IB Shares (PVTIGB)

Putnam VT Voyager Fund - IB Shares (PVTVB)

T. ROWE PRICE

Blue Chip Growth Portfolio - II (TRBCG2)

Equity Income Portfolio - II (TREI2)

Limited - Term Bond Portfolio - II (TRLT2)*

VAN ECK ASSOCIATES CORPORATION

Worldwide Insurance Trust - Worldwide Bond Fund - Class R1 (VWBFR)

Worldwide Insurance Trust - Worldwide Bond Fund - Initial Class (VWBF)

Worldwide Insurance Trust - Worldwide Emerging Markets Fund - Class R1 (VWEMR)

Worldwide Insurance Trust - Worldwide Emerging Markets Fund - Initial Class (VWEM)

Worldwide Insurance Trust - Worldwide Hard Assets Fund - Class R1 (VWHAR)

Worldwide Insurance Trust - Worldwide Hard Assets Fund - Initial Class (VWHA)

Worldwide Insurance Trust - Worldwide Real Estate Fund - Class R1 (VWRER)*

VANGUARD GROUP OF INVESTMENT COMPANIES

Vanguard(R) Variable Insurance Funds - Equity Income Portfolio (VVEI)

Vanguard(R) Variable Insurance Funds - High Yield Bond Portfolio (VVHYB)

Vanguard(R) Variable Insurance Funds - Mid-Cap Index Portfolio (VVMCI)

Vanguard(R) Variable Insurance Funds - Total Bond Market Index Portfolio (VVHGB)

WADDELL & REED, INC.

Ivy Fund Variable Insurance Portfolios, Inc. - Asset Strategy (WRASP)

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The Nationwide Provident VLI Separate Account 1 Notes to Financial Statements

WELLS FARGO FUNDS

Advantage Funds Variable Trust - VT Discovery Fund (SVDF)

Advantage Funds Variable Trust - VT Opportunity Fund (SVOF)

Advantage Funds Variable Trust - VT Small Cap Growth Fund (WFVSCG)

Z CLOSED FUNDS

Worldwide Insurance Trust - Worldwide Real Estate Fund - Initial Class (obsolete) (VWRE)

* At December 31, 2009, contract owners were not invested in the fund.

The policyholder’s equity is affected by the investment results of each fund, equity transactions by policyholders and certain contract expenses (see note 5).

Net premiums from in force policies are allocated to the subaccounts in accordance with policyholder instructions and are recorded as policyholders net premiums in the accompanying statements of changes in net assets. Such amounts are used to provide money to pay benefits under the policies. The Separate Account’s assets are the property of the Company.

Transfers between investment portfolios include transfers between the subaccounts and the Guaranteed Account (not shown), which is part of the Company’s general account.

A policyholder may choose from among a number of different underlying mutual fund options. The underlying mutual fund options are available through the variable life policy and therefore, not available to the general public directly.

Some of the underlying mutual funds have been established by investment advisers, which manage publicly traded mutual funds having similar names and investment objectives. While some of the underlying mutual funds may be similar to, and may in fact be modeled after, publicly traded mutual funds, the underlying mutual funds are not otherwise directly related to any publicly traded mutual fund. Consequently, the investment performance of publicly traded mutual funds and any corresponding underlying mutual funds may differ substantially.

(2) Summary of Significant Accounting Policies

The following is a summary of the significant accounting policies followed by the Separate Account in preparing the accompanying financial statements.

Investment Valuation:

The fair value of the underlying mutual funds is based at the closing net asset value per share at December 31, 2009. Transactions are recorded on the trade date (date the order to buy or sell is executed). Dividend income is recorded on the ex-dividend date.

Realized Gains and Losses:

Realized gains and losses on sales of investment shares are determined using the specific identification basis for financial reporting and income tax purposes.

Federal Income Taxes:

Operations of the Separate Account form a part of, and are taxed with, operations of the Company which is taxed as a life insurance company under the Internal Revenue Code.

The Company does not provide for income taxes within the Separate Account. Taxes are generally the responsibility of the contract owner upon termination or withdrawal.

Estimates:

The preparation of the accompanying financial statements required management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities, if any, at the date of the financial statements and the reported amounts from operations and policy transactions during the reporting period. Actual results could differ from those estimates.

Recently Issued Accounting Standards:

In September 2006, the FASB issued FASB ASC 820, Fair Value Measurements and Disclosures (SFAS No. 157, Fair Value Measurements). FASB ASC 820 provides enhanced guidance for using fair value to measure assets and liabilities and requires new disclosures about fair value measurements and also provides guidance regarding the extent to which companies measure assets and liabilities at fair value, the information used to measure fair value, and the effect of fair value measurements on earnings. For assets and liabilities that are measured at fair value on a recurring basis in periods subsequent to initial recognition, the reporting entity shall disclose information that enables financial statement users to assess the inputs used to develop those measurements. FASB ASC 820 applies whenever other standards require (or permit) assets or liabilities to be measured at fair value but does not expand the use of fair value in any new circumstances.

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The Nationwide Provident VLI Separate Account 1 Notes to Financial Statements

FASB ASC 820 is effective for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years, with early adoption permitted. The Separate Account adopted FASB ASC 820 effective January 1, 2008. The adoption of FASB ASC 820 did not have a material impact on the Separate Account’s financial position or results of operations.

In September 2009 the FASB issued ASU 2009-12, which amends FASB ASC 820, Fair Value Measurements and Disclosures. This guidance applies to reporting entities that hold an investment that is required or permitted to be measured or disclosed at fair value on a recurring or nonrecurring basis if the investment does not have a readily determinable fair value and the investee has attributes of an investment company. For these investments, this update allows, as a practical expedient, the use of net asset value (NAV) as the basis to estimate fair value as long as it is not probable, as of the measurement date that the investment will be sold and NAV is not the value that will be used in the sale. The NAVs must be calculated consistent with the American Institute of Certified Public Accountants Audit and Accounting Guide, Investment Companies, which generally requires these investments to be measured at fair value. Additionally, the guidance provided updated disclosures for investments within its scope and noted that if the investor can redeem the investment with the investee on the measurement date at NAV, the investment should likely be classified as Level 2 in the fair value hierarchy. Investments that cannot be redeemed with the investee at NAV would generally be classified as Level 3 in the fair value hierarchy. If the investment is not redeemable with the investee on the measurement date, but will be at a future date, the length of time until the investment is redeemable should be considered in determining classification as Level 2 or 3. This guidance is effective for interim and annual periods ending after December 15, 2009 with early adoption permitted. The Separate Account adopted this guidance effective the period ending December 31, 2009. The adoption of this guidance did not have a material impact on the financial statements of the Separate Account.

Subsequent Events

The Company evaluated subsequent events through the date the financial statements were issued with the SEC.

(3) Death Benefits

Death benefit proceeds result in a redemption of policy value from the Separate Account and payment of those proceeds, less any outstanding policy loans (and policy charges), to the legal beneficiary. In the event that the guaranteed death benefit exceeds the account value on the date of death, the excess is paid by the Company’s general account.

(4) Policy Loans

Policy provisions allow policyholders to borrow up to the policy’s non-loaned surrender value (90% of cash surrender value for Options policies). Interest is charged on the outstanding loan and is due and payable at the end of each policy year or when the loan is repaid. Any unpaid interest is added to the loan balance and bears interest at the same loan rate.

At the time the loan is granted, the amount of the loan is transferred from the Separate Account to the Company’s general account as collateral for the outstanding loan. Collateral amounts in the general account are credited with the stated rate of interest in effect at the time the loan is made. Interest credited is paid by Nationwide Provident’s general account to the Separate Account. Loan repayments result in a transfer of collateral including interest back to the Separate Account.

(5) Expenses and Related Party Transactions

Deductions from Premiums

Nationwide Provident makes certain deductions from premiums before amounts are allocated to each subaccount selected by the policyholder. The deductions may include (1) state premium taxes (0-4% of premium/scheduled premium payments depending on the Insured state of residence), (2) premiums for supplementary benefits, (3) sales charges (5% of each scheduled base/unscheduled premium for Options policies only) and (4) premium processing charges and Federal tax charges (1.5-10% of premiums). Premiums adjusted for these deductions are recorded as net premiums in the statements of changes in net assets.

For the year ended December 31, 2009, total transfers between the Separate Account and the Company were $7,463,129. Transfers to and from the Separate Account to the fixed account are included in either redemptions, or transfers between funds on the accompanying Statements of Changes in Contract Owners’ Equity.

Mortality and Expense Charges

In addition to the aforementioned charges, each subaccount is charged for mortality and expense risks assumed by the Company. The annual rates charged to cover these risks range from 0.00% to 1.00% of the average daily net assets held for the benefit of policyholders. These charges are assessed through the daily unit value calculation.

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The Nationwide Provident VLI Separate Account 1 Notes to Financial Statements

Cost of Insurance

Each subaccount is also charged by the Company for the cost of insurance protection, which is based on a number of variables such as issue age, sex, premium class, policy year and net amount at risk (death benefit less total policy account value). For single premium policies, the charge is accrued daily and deducted annually from the amount invested. For scheduled premium, modified premium and flexible premium adjustable policies, the charge is deducted monthly. The amount of the charge is computed based upon the amount of insurance provided during the year and the insured’s attained age. The cost of insurance charge is assessed monthly against each policy by liquidating units.

Administrative Charges

Depending upon the type of policy, additional recurring monthly deductions may be made for (1) administrative charges (current charges ranging from$3.25-$8.00; guaranteed maximum charges ranging from a flat fee of $12 to a range of $3.25 plus $0.015 per $1,000 of face amount to 12 plus $0.03 per $1,000 of face amount), (2) first year policy charges (current charges ranging from $5.00-$17.50; guaranteed maximum charges ranging from a flat fee of $5.00 to $17.50 or $12.00 plus $0.03 per $1,000 of Face Amount) and (3) supplementary charges (ranging from $0-0.11 per $1,000 of face amount). Optional monthly deductions for additional riders may be made for (1) disability waiver benefit rider which waives monthly deductions in the event of disability (current and guaranteed maximum charge ranging from $.01-$1.76 per $1,000 of net amount at risk), (2) disability waiver of premium benefit waives agreed upon premium in the event of disability (current and guaranteed maximum charges range from 2% to 23.2% of agreed upon premium amount to an annual rate of $0.17-$5.32 per $1,000 of Face Amount added to each scheduled premium payment. If the Special Premium Payment Provision is in effect, an annual rate of $0.16-$4.92 per $1,000 of Face Amount), (3) children’s term insurance rider which provides a death benefit for a covered child ($.52 per $1,000 of coverage), (4) additional insurance benefit rider or term insurance rider (current charge of $.02-$115.10 per $1,000 of coverage for single life policies and $0-$20.79 for survivorship policies; guaranteed maximum charge of $0.09-$420.82 per $1,000 of Rider coverage amount per month), (5) convertible term life insurance rider for term insurance on someone other than the primary insured individual (current charges of $.06-$113.17 per $1,000 of rider coverage; guaranteed maximum charge of $0.09-$420.82 per $1,000 of Rider Coverage amount per month), (6) minimum death benefit which guarantees a death benefit if specified premiums are paid (current and guaranteed maximum charges are $.01 per $1,000 of Guaranteed Minimum Death Benefit), (7) long term care accelerated benefit which pays an accelerated death benefit in the event of a covered illness ($.02-$3.24 per $1,000 of net amount at risk; no maximum amount is guaranteed), (8) long term care waiver benefit waives monthly deductions in the event of a covered illness ($.01-$3.47 per $1,000 of net amount at risk; no maximum amount is guaranteed), (9) long term care extended insurance benefit rider provides additional benefits after accelerated benefits are exhausted ($.01-$8.72 per $1,000 of rider coverage) and (10) four years survivorship term life insurance provides additional death benefits in the first four years of the policy (current charges ranging from $.03-$.15 per $1,000 of rider coverage; guaranteed maximum charge ranging from $0.03-$2.75 per $1,000 of Rider coverage amount per month). A face amount increase charge is made upon an increase in face amount (current charges are as low as $0.00; guaranteed maximum charges range from $50-$300 plus $0-$3 per $1,000 of face amount increase). During any given policy year, the first four or twelve transfers (depending on the policy) by a policyholder of amounts in the subaccounts are free of charge. A fee of $25 is assessed for each additional transfer. These charges are included in the Statements of Changes in Contract Owner’s Equity and are assessed against each policy by liquidating units.

The policies provide for an initial free-look period. If a policy is cancelled within certain time constraints, the policyholder will receive a refund equal to the policy account value plus reimbursements of certain deductions previously made under the policy. Where state law requires a minimum refund equal to gross premiums paid, the refund will instead equal the gross premiums paid on the policy and will not reflect investment experience.

If a policy is surrendered within the first 9-15 policy years (depending on the policy), a contingent deferred sales load charge and/or contingent deferred administrative charge is assessed. The deferred administrative charge ranges from $0-$5 per $1,000 face amount. The deferred sales load charge ranges from 6-35% of premiums paid up to the sales surrender cap. A deferred sales charge and/or a deferred administrative charge will be imposed if certain policies are surrendered or lapse at any time within 10-15 years after the effective date of an increase in face amount (similar charges applied to surrenders/lapses for the initial face amount are applied to the premiums related to the increase in face amount).

A portion of the deferred sales charge and/or deferred administrative charge will be deducted if the face amount is decreased in the first 10-15 years or the related increment of face amount is decreased within 10- 15 years after such increase took effect. These charges are included with administrative charges in the Statements of Changes in Contract Owner’s Equity and are assessed against each policy by liquidating units.

Upon the transfer of the subaccount value out of a subaccount within 60 days after allocation to that subaccount, certain subaccounts charge a fee of 1% of the amount transferred. These amounts are paid directly to the fund company, and are included in net investment income in the Statements of Operations.

The Company made a daily asset charge against the assets of the Zero Coupon Bond 2007 Series Subaccount. The charge was to reimburse the Company for the transaction charge paid directly by the Company to Merrill Lynch, Pierce, Fenner & Smith Incorporated (MLPFS) on the sale of the Zero Coupon Trust units to the Zero Coupon Bond 2007 Series Subaccount. The Company paid these amounts from general account assets. The amount of the asset charge currently was equivalent to an effective annual rate of .25% of the average daily net assets of each Subaccount. The charge was cost based (taking into

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The Nationwide Provident VLI Separate Account 1 Notes to Financial Statements

account the loss of interest) with no anticipated element of profit for the Company. These charges were included in the statements of changes in net assets and were assessed against each policy by liquidating units.

The Company, or an affiliate, may receive compensation from a fund or its investment adviser or distributor (or affiliates thereof) in connection with administration, distribution, or other services provided with respect to the funds and their availability through the policies. The amount of this compensation is based upon a percentage of the assets of the fund attributable to the policies and other policies issued by the Company (or an affiliate). These percentages differ, and some funds, advisers, or distributors (or affiliates) may pay the Company more than others. The Company also may receive 12b-1 fees.

(6) Fair Value Measurement

FASB ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In determining fair value, the Account generally uses the market approach as the valuation technique due to the nature of the mutual fund investments offered in the Separate Account. This technique maximizes the use of observable inputs and minimizes the use of unobservable inputs.

In accordance with FASB ASC 820, the Separate Account categorized its financial instruments into a three level hierarchy based on the priority of the inputs to the valuation technique. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). If the inputs used to measure fair value fall within different levels of the hierarchy, the category level is based on the lowest priority level input that is significant to the fair value measurement of the instrument in its entirety.

The Separate Account categorizes financial assets recorded at fair value as follows:

• Level 1 – Unadjusted quoted prices accessible in active markets for identical assets at the measurement date. The assets utilizing Level 1 valuations represent investments in publicly-traded registered mutual funds with quoted market prices.  

• Level 2 – Unadjusted quoted prices for similar assets in active markets or inputs (other than quoted prices) that are observable or that are derived principally from or corroborated by observable market data through correlation or other means. The assets utilizing Level 2 valuations represent investments in privately-traded registered mutual funds only offered through insurance products. These funds have no unfunded commitments or restrictions and the Separate Account always has the ability to redeem its interest in the funds with the investee at NAV daily. The investment objectives of these mutual funds are described by the fund name in note 1 and in more detail in the applicable product prospectus.  

• Level 3 – Prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. The Separate Account invests only in funds with fair value measurements in the first two levels of the fair value hierarchy.  

The following table summarizes assets measured at fair value on a recurring basis as of December 31, 2009:

	Level 1		Level 2		Level 3		Total
Separate Account Investments	$	0	$	1,250,194,692	$	0	$	1,250,194,692

Net Accounts Payable of $311,626 are measured at settlement value which approximates the fair value payable to the short-term nature of such liabilities.

The Separate Account did not have any assets or liabilities reported at fair value on a nonrecurring basis required to be disclosed under FASB ASC 820.

The cost of purchases and sales of Investments for the year ended December 31, 2009 are as follows:

	Purchases of Investments		Sales of Investments
SmallCap Growth Portfolio - Class O Shares (AASCO)	$	918,613	$	2,863,762
Variable Series Funds, Inc. - Global Allocation V.I. Fund - Class II (MLVGA2)		421,708		14,856
Janus Aspen Series - Balanced Portfolio - Service Shares (JABS)		1,505,329		822,262
Janus Aspen Series - Forty Portfolio - Service Shares (JACAS)		1,319,771		710,965
Janus Aspen Series - Global Technology Portfolio - Service II Shares (JAGTS2)		204,545		221,593
Janus Aspen Series - Global Technology Portfolio - Service Shares (JAGTS)		47,873		38,485
Janus Aspen Series - INTECH Risk-Managed Core Portfolio - Service Shares (JARLCS)		16,865		242,542
Janus Aspen Series - Overseas Portfolio - Service II Shares (JAIGS2)		1,456,983		1,252,979
Janus Aspen Series - Overseas Portfolio - Service Shares (JAIGS)		632,041		989,463
Investors Growth Stock Series - Initial Class (MIGIC)		166,624		158,264
Value Series - Initial Class (MVFIC)		685,766		1,097,717
Core Plus Fixed Income Portfolio - Class I (MSVFI)		194,944		841,339
Emerging Markets Debt Portfolio - Class I (MSEM)		353,399		480,567

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The Nationwide Provident VLI Separate Account 1 Notes to Financial Statements

U.S. Real Estate Portfolio - Class I (MSVRE)	326,812	6,491,080
AllianceBernstein NVIT Global Fixed Income Fund - Class III (NVAGF3)	124,198	2,211
AllianceBernstein NVIT Global Fixed Income Fund - Class VI (NVAGF6)	98,477	404
American Century NVIT Multi Cap Value Fund - Class I (NVAMV1)	14,209	25
American Funds NVIT Asset Allocation Fund - Class II (GVAAA2)	92,279	71,345
American Funds NVIT Bond Fund - Class II (GVABD2)	150,137	158,483
American Funds NVIT Global Growth Fund - Class II (GVAGG2)	406,630	139,583
American Funds NVIT Growth Fund - Class II (GVAGR2)	352,303	143,133
American Funds NVIT Growth-Income Fund - Class II (GVAGI2)	91,048	13,860
Federated NVIT High Income Bond Fund - Class I (HIBF)	810,369	548,622
Federated NVIT High Income Bond Fund - Class III (HIBF3)	957,206	359,339
Gartmore NVIT Emerging Markets Fund - Class I (GEM)	527,458	1,085,317
Gartmore NVIT Emerging Markets Fund - Class III (GEM3)	722,974	1,645,930
Gartmore NVIT Global Utilities Fund - Class I (GVGU1)	60,075	102,963
Gartmore NVIT Global Utilities Fund - Class III (GVGU)	273,331	824,723
Gartmore NVIT International Equity Fund - Class VI (NVIE6)	574,281	175,904
Neuberger Berman NVIT Multi Cap Opportunities Fund - Class I (NVNMO1)	15,957,367	1,134,594
Neuberger Berman NVIT Socially Responsible Fund - Class II (NVNSR2)	11,163	6,172
NVIT Cardinal Aggressive Fund - Class I (NVCRA1)	101,791	108,899
NVIT Cardinal Balanced Fund - Class I (NVCRB1)	6,711	421
NVIT Cardinal Capital Appreciation Fund - Class I (NVCCA1)	279,427	34,017
NVIT Cardinal Conservative Fund - Class I (NVCCN1)	1,100	586
NVIT Cardinal Moderate Fund - Class I (NVCMD1)	296,708	56,441
NVIT Cardinal Moderately Aggressive Fund - Class I (NVCMA1)	541,073	14,141
NVIT Cardinal Moderately Conservative Fund - Class I (NVCMC1)	4,079	6,940
NVIT Core Bond Fund - Class I (NVCBD1)	121,480	135,029
NVIT Core Plus Bond Fund - Class I (NVLCP1)	10,466	30,074
NVIT Fund - Class IV (TRF4)	5,663,735	25,554,146
NVIT Global Financial Services Fund - Class I (GVGF1)	50,943	198,450
NVIT Global Financial Services Fund - Class III (GVGFS)	216,760	470,157
NVIT Government Bond Fund - Class I (GBF)	184,380	349,257
NVIT Government Bond Fund - Class IV (GBF4)	4,646,668	5,112,425
NVIT Growth Fund - Class IV (CAF4)	841,943	2,508,315
NVIT Health Sciences Fund - Class I (GVGH1)	61,713	251,744
NVIT Health Sciences Fund - Class III (GVGHS)	77,031	268,284
NVIT Investor Destinations Aggressive Fund - Class II (GVIDA)	947,226	1,626,150
NVIT Investor Destinations Capital Appreciation Fund - Class II (NVDCA2)	1,057	13
NVIT Investor Destinations Conservative Fund - Class II (GVIDC)	1,323,425	1,064,807
NVIT Investor Destinations Moderate Fund - Class II (GVIDM)	29,397,099	6,436,873
NVIT Investor Destinations Moderately Aggressive Fund - Class II (GVDMA)	3,780,305	3,673,806
NVIT Investor Destinations Moderately Conservative Fund - Class II (GVDMC)	310,756	949,071
NVIT Mid Cap Index Fund - Class I (MCIF)	489,674	891,781
NVIT Multi-Manager International Growth Fund - Class III (NVMIG3)	1,739,714	213,206
NVIT Multi-Manager International Value Fund - Class III (GVDIV3)	1,694,363	5,266,806
NVIT Multi-Manager International Value Fund - Class IV (GVDIV4)	509,471	5,746,710
NVIT Multi-Manager Large Cap Growth Fund - Class I (NVMLG1)	1,640,305	253,834
NVIT Multi-Manager Large Cap Value Fund - Class I (NVMLV1)	1,467,159	218,319
NVIT Multi-Manager Mid Cap Growth Fund - Class I (NVMMG1)	44,692,240	4,752,363
NVIT Multi-Manager Mid Cap Value Fund - Class II (NVMMV2)	5,336,605	602,324
NVIT Multi-Manager Small Cap Growth Fund - Class I (SCGF)	429,702	613,951
NVIT Multi-Manager Small Cap Value Fund - Class IV (SCVF4)	721,332	5,115,308
NVIT Multi-Manager Small Company Fund - Class IV (SCF4)	787,630	6,670,669
NVIT Multi-Sector Bond Fund - Class I (MSBF)	499,607	529,823
NVIT S&P 500 Index Fund - Class IV (GVEX4)	6,929,284	27,985,504
NVIT Short Term Bond Fund - Class II (NVSTB2)	1,460,754	230,553
NVIT Technology & Communications Fund - Class I (GGTC)	115,504	177,048
NVIT Technology & Communications Fund - Class III (GGTC3)	188,571	182,375
NVIT U.S. Growth Leaders Fund - Class I (GVUG1)	113,293	826,736
Oppenheimer NVIT Large Cap Growth Fund - Class I (NVOLG1)	87,045	1,822
Templeton NVIT International Value Fund - Class III (NVTIV3)	12,477	1,165
Van Kampen NVIT Comstock Value Fund - Class IV (EIF4)	683,289	4,012,522
Van Kampen NVIT Real Estate Fund - Class I (NVRE1)	2,761,108	284,655
VaNVIT Money Market Fund - Class IV (SAM4)	22,343,601	25,961,456
Advisers Management Trust - Short Duration Bond Portfolio - I Class Shares (AMTB)	2,471,883	2,657,268
V.I. Basic Value Fund - Series I (AVBVI)	104,751	3,033,184
V.I. Capital Appreciation Fund - Series I (AVCA)	64,323	89,136
V.I. Capital Development Fund - Series I (AVCDI)	53,261	209,462
VPS Growth and Income Portfolio - Class A (ALVGIA)	450,229	1,555,154
VPS Small/Mid Cap Value Portfolio: Class A (ALVSVA)	649,685	1,230,619
VP Income & Growth Fund - Class I (ACVIG)	251,409	192,508
VP Inflation Protection Fund - Class II (ACVIP2)	1,072,717	724,247
VP International Fund - Class I (ACVI)	175,454	398,268
VP International Fund - Class III (ACVI3)	98,986	2,274,132

(Continued)

The Nationwide Provident VLI Separate Account 1 Notes to Financial Statements

VP Mid Cap Value Fund - Class I (ACVMV1)	400,449	462,501
VP Ultra(R) Fund - Class I (ACVU1)	191,453	2,291,474
VP Value Fund - Class I (ACVV)	975,105	2,152,181
VP Vista(SM) Fund - Class I (ACVVS1)	63,829	701,468
Small Cap Stock Index Portfolio - Service Shares (DVSCS)	1,721,345	1,947,367
Stock Index Fund, Inc. - Initial Shares (DSIF)	1,378,387	1,978,995
Appreciation Portfolio - Initial Shares (DCAP)	571,446	978,667
Developing Leaders Portfolio - Initial Shares (DSC)	22,584	35,584
Capital Appreciation Fund II - Primary Shares (FVCA2P)	42,380	15,529
Clover Value Fund II - Primary Shares (FALF)	7,808	56,830

(Continued)

The Nationwide Provident VLI Separate Account 1 Notes to Financial Statements

Quality Bond Fund II - Primary Shares (FQB)	1,189,770	981,881
Equity-Income Portfolio - Initial Class (FEIP)	4,789,941	26,147,657
High Income Portfolio - Initial Class (FHIP)	1,433,180	4,065,354
VIP Fund - Asset Manager Portfolio - Initial Class (FAMP)	2,250,001	5,729,996
VIP Fund - Contrafund Portfolio - Initial Class (FCP)	3,466,085	20,397,371
VIP Fund - Energy Portfolio - Service Class 2 (FNRS2)	386,113	484,557
VIP Fund - Equity-Income Portfolio - Service Class (FEIS)	604,277	928,919
VIP Fund - Freedom Fund 2010 Portfolio - Service Class (FF10S)	50,834	77,674
VIP Fund - Freedom Fund 2020 Portfolio - Service Class (FF20S)	597,099	370,924
VIP Fund - Freedom Fund 2030 Portfolio - Service Class (FF30S)	236,246	150,947
VIP Fund - Growth Portfolio - Initial Class (FGP)	4,385,935	34,353,841
VIP Fund - Growth Portfolio - Service Class (FGS)	295,102	531,039
VIP Fund - High Income Portfolio - Initial Class R (FHIPR)	1,830,814	1,569,304
VIP Fund - Investment Grade Bond Portfolio - Initial Class (FIGBP)	8,398,658	7,637,046
VIP Fund - Investment Grade Bond Portfolio - Service Class (FIGBS)	316,979	206,879
VIP Fund - Mid Cap Portfolio - Service Class (FMCS)	1,101,217	3,315,027
VIP Fund - Overseas Portfolio - Initial Class (FOP)	586,008	4,044,947
VIP Fund - Overseas Portfolio - Initial Class R (FOPR)	2,405,654	3,510,863
VIP Fund - Overseas Portfolio - Service Class (FOS)	2,625	34,506
VIP Fund - Overseas Portfolio - Service Class R (FOSR)	465,052	445,563
VIP Fund - Value Strategies Portfolio - Service Class (FVSS)	627,348	892,669
Franklin Rising Dividends Securities Fund - Class 1 (FTVRDI)	2,228,738	5,314,202
Franklin Small Cap Value Securities Fund - Class 1 (FTVSVI)	1,197,679	1,995,501
Templeton Developing Markets Securities Fund - Class 3 (FTVDM3)	1,031,014	824,179
Templeton Foreign Securities Fund - Class 1 (TIF)	338,080	380,369
Templeton Global Bond Securities Fund - Class 3 (FTVGI3)	894,870	436,007
VIP Founding Funds Allocation Fund - Class 2 (FTVFA2)	8,217	911
International Portfolio - S Class Shares (AMINS)	24,700	754,592
Mid-Cap Growth Portfolio - I Class Shares (AMCG)	55,219	1,551,428
Partners Portfolio - I Class Shares (AMTP)	865,352	28,407,910
Regency Portfolio - S Class Shares (AMRS)	11,836	287,724
Small-Cap Growth Portfolio - S Class Shares (AMFAS)	85,251	275,767
Socially Responsive Portfolio - I Class Shares (AMSRS)	118,422	447,062
Capital Appreciation Fund/VA - Non-Service Shares (OVGR)	349,415	1,316,586
Global Securities Fund/VA - Class 3 (OVGS3)	912,574	2,247,387
Global Securities Fund/VA - Non-Service Shares (OVGS)	161,547	678,130
High Income Fund/VA - Class 3 (OVHI3)	81,692	190,985
High Income Fund/VA - Non-Service Shares (OVHI)	64,608	489,578
Main Street Fund(R)/VA - Non-Service Shares (OVGI)	231,207	663,793
Main Street Small Cap Fund(R)/VA - Non-Service Shares (OVSC)	167,865	770,260
Foreign Bond Portfolio (Unhedged) - Administrative Class (PMVFBA)	100,937	7,867
Low Duration Portfolio - Administrative Class (PMVLDA)	150,166	9,958
Putnam VT Growth and Income Fund - IB Shares (PVGIB)	24,379	229,368
Putnam VT International Equity Fund - IB Shares (PVTIGB)	117,032	341,509
Putnam VT Voyager Fund - IB Shares (PVTVB)	684,199	116,427
Blue Chip Growth Portfolio - II (TRBCG2)	168,161	555,250
Equity Income Portfolio - II (TREI2)	357,047	630,044
Limited-Term Bond Portfolio - II (TRLT2)	339,396	1,508,708
Worldwide Insurance Trust - Worldwide Bond Fund - Class R1 (VWBFR)	1,403,236	1,494,690
Worldwide Insurance Trust - Worldwide Bond Fund - Initial Class (VWBF)	527,132	1,151,014
Worldwide Insurance Trust - Worldwide Emerging Markets Fund - Class R1 (VWEMR)	2,405,080	6,796,532
Worldwide Insurance Trust - Worldwide Emerging Markets Fund - Initial Class (VWEM)	1,431,997	4,450,446
Worldwide Insurance Trust - Worldwide Hard Assets Fund - Class R1 (VWHAR)	2,357,074	2,412,514
Worldwide Insurance Trust - Worldwide Hard Assets Fund - Initial Class (VWHA)	688,211	1,474,543
Worldwide Insurance Trust - Worldwide Real Estate Fund - Class R1 (VWRER)	354,979	7,378,171
Vanguard(R) Variable Insurance Funds - Equity Income Portfolio (VVEI)	338,082	682,936
Vanguard(R) Variable Insurance Funds - High Yield Bond Portfolio (VVHYB)	264,176	208,764
Vanguard(R) Variable Insurance Funds - Mid-Cap Index Portfolio (VVMCI)	502,987	961,586
Vanguard(R) Variable Insurance Funds - Total Bond Market Index Portfolio (VVHGB)	392,658	328,585
Ivy Fund Variable Insurance Portfolios, Inc. - Asset Strategy (WRASP)	163,217	5,391
Advantage Funds Variable Trust - VT Discovery Fund (SVDF)	239,543	7,106,050
Advantage Funds Variable Trust - VT Opportunity Fund (SVOF)	138,735	8,198,087
Advantage Funds Variable Trust - VT Small Cap Growth Fund (WFVSCG)	90,284	47,761
J.P. Morgan NVIT Balanced Fund - Class IV (obsolete) (BF4)	431,890	38,171,683

(Continued)

The Nationwide Provident VLI Separate Account 1 Notes to Financial Statements

NVIT Mid Cap Growth Fund - Class IV (obsolete) (SGRF4)		413,941		42,848,925
Worldwide Insurance Trust - Worldwide Real Estate Fund - Initial Class (obsolete) (VWRE)		29,296		4,235,268
Total	$	242,171,925	$	479,273,444

(7) Financial Highlights

The Company offers several variable life products through the Separate Account that have unique combinations of features and fees that are assessed to the contract owner. Differences in fee structures result in a variety of contract expense rates, unit fair values and total returns. The following tabular presentation is a summary of units, unit fair values and contract owners’ equity outstanding for variable annuity contracts as of the end of the periods indicated, and contract expense rate, investment income ratio and total return for each period in the five-year period ended December 31, 2009. The information is presented as a range of minimum to maximum values based upon product grouping. The range is determined by identifying the lowest and the highest contract expense rate for contracts with units outstanding as of the balance sheet date. The unit fair values and total returns related to these identified contract expense rates are also disclosed as a range below. Accordingly, some individual contract amounts may not be within the ranges presented.

(Continued)

PMLIC VL Separate Account (NOTES TO FINANCIAL STATEMENTS, Continued) December 31, 2009

	Contract Expense Rate**					Units	Unit Fair Value				Contract Owners’ Equity		Investment Income Ratio***		Total Return****					Inception Date
SmallCap Growth Portfolio - Class O Shares (AASCO)
2009	0.60	%	to	0.75	%	149,187	$	1273.09	to	124.72	$	24,454,761	0.00	%	44.64	%	to	44.42	%
2008	0.60	%	to	0.75	%	172,061		880.2	to	86.36		19,374,622	0.00	%	-46.92	%	to	-47	%
2007	0.60	%	to	0.75	%	183,894		1658.29	to	162.95		39,481,884	0.00	%	16.54	%	to	16.36	%
2006	0.60	%	to	0.75	%	201,820		1422.98	to	140.04		36,757,345	0.00	%	19.3	%	to	19.12	%
2005	0.60	%	to	0.75	%	220,956		1192.76	to	117.56		34,011,465	0.00	%	16.18	%	to	16.01	%
Variable Series Funds, Inc. - Global Allocation V.I. Fund - Class II (MLVGA2)
2009	0.75	%				3,470		121.22				420,625	2.38	%	21.22	%				*
Janus Aspen Series - Balanced Portfolio - Service Shares (JABS)
2009	0.60	%	to	0.75	%	12,140		1586.12	to	157.03		2,546,022	3.15	%	24.83	%	to	24.64	%
2008	0.60	%	to	0.75	%	9,537		1270.61	to	125.99		1,400,772	2.83	%	-16.56	%	to	-16.69	%
2007	0.60	%	to	0.75	%	5,511		1522.83	to	151.22		1,032,293	2.32	%	9.62	%	to	9.46	%
2006	0.60	%	to	0.75	%	6,135		1389.13	to	138.15		1,014,333	1.94	%	9.76	%	to	9.59	%
2005	0.60	%	to	0.75	%	5,107		1265.66	to	126.06		795,226	2.05	%	7.02	%	to	6.86	%
Janus Aspen Series - Forty Portfolio - Service Shares (JACAS)
2009	0.60	%	to	0.75	%	24,248		1630.89	to	161.22		4,355,169	0.02	%	45.14	%	to	44.92	%
2008	0.60	%	to	0.75	%	19,072		1123.66	to	111.25		2,416,800	0.01	%	-44.64	%	to	-44.73	%
2007	0.60	%	to	0.75	%	17,297		2029.84	to	201.27		4,181,145	0.20	%	35.81	%	to	35.61	%
2006	0.60	%	to	0.75	%	14,008		1494.58	to	148.42		2,333,227	0.14	%	8.47	%	to	8.3	%
2005	0.60	%	to	0.75	%	15,883		1377.94	to	137.04		2,448,698	0.01	%	11.88	%	to	11.72	%
Janus Aspen Series - Global Technology Portfolio - Service II Shares (JAGTS2)
2009	0.65	%	to	0.75	%	5,013		131.56	to	130.82		657,526	0.00	%	56.08	%	to	55.92	%
2008	0.65	%	to	0.75	%	4,559		84.29	to	83.9		383,203	0.09	%	-44.26	%	to	-44.32	%
2007	0.65	%	to	0.75	%	4,592		151.22	to	150.67		693,195	0.59	%	20.96	%	to	20.84	%
2006	0.65	%	to	0.75	%	1,946		125.02	to	124.68		242,903	0.00	%	7.24	%	to	7.14	%
2005	0.65	%	to	0.75	%	1,389		116.57	to	116.38		161,721	0.00	%	10.61	%	to	10.5	%
Janus Aspen Series - Global Technology Portfolio - Service Shares (JAGTS)
2009	0.60	%	to	0.75	%	797		1294.53	to	127.97		167,470	0.00	%	55.96	%	to	55.72	%
2008	0.60	%	to	0.75	%	1,026		830.05	to	82.18		98,533	0.08	%	-44.31	%	to	-44.39	%
2007	0.60	%	to	0.75	%	1,416		1490.41	to	147.78		235,882	0.34	%	20.97	%	to	20.78	%
2006	0.60	%	to	0.75	%	1,499		1232.09	to	122.35		203,635	0.00	%	7.18	%	to	7.02	%
2005	0.60	%	to	0.75	%	2,605		1149.5	to	114.32		305,529	0.00	%	10.88	%	to	10.72	%
Janus Aspen Series - INTECH Risk-Managed Core Portfolio - Service Shares (JARLCS)
2009	0.60	%				19		1414.58				26,877	1.15	%	21.82	%
2008	0.60	%	to	0.75	%	1,151		1161.19	to	115.14		154,480	0.70	%	-36.62	%	to	-36.72	%
2007	0.60	%	to	0.75	%	1,135		1832.2	to	181.94		243,433	0.48	%	5.49	%	to	5.34	%
2006	0.60	%	to	0.75	%	1,125		1736.78	to	172.73		231,276	0.13	%	10.11	%	to	9.94	%
2005	0.60	%	to	0.75	%	743		1577.35	to	157.11		162,396	1.43	%	10.25	%	to	10.09	%
Janus Aspen Series - Overseas Portfolio - Service II Shares (JAIGS2)
2009	0.65	%	to	0.75	%	33,537		235.21	to	233.88		7,869,144	0.45	%	77.91	%	to	77.73	%
2008	0.65	%	to	0.75	%	32,523		132.21	to	131.59		4,290,799	2.99	%	-52.52	%	to	-52.57	%
2007	0.65	%	to	0.75	%	24,230		278.44	to	277.43		6,734,353	0.44	%	27.24	%	to	27.11	%
2006	0.65	%	to	0.75	%	16,893		218.84	to	218.26		3,701,931	2.40	%	45.75	%	to	45.6	%
2005	0.65	%	to	0.75	%	5,838		150.15	to	149.9		875,717	1.14	%	31.16	%	to	31.03	%

(Continued)

PMLIC VL Separate Account (NOTES TO FINANCIAL STATEMENTS, Continued) December 31, 2009

	Contract Expense Rate**					Units	Unit Fair Value				Contract Owners’ Equity		Investment Income Ratio***		Total Return****					Inception Date
Janus Aspen Series - Overseas Portfolio - Service Shares (JAIGS)
2009	0.60	%	to	0.75	%	3,810	$	2523.11	to	249.42	$	2,631,286	0.47	%	78	%	to	77.73	%
2008	0.60	%	to	0.75	%	4,620		1417.47	to	140.34		1,627,041	2.83	%	-52.51	%	to	-52.59	%
2007	0.60	%	to	0.75	%	5,892		2985.08	to	295.98		3,941,557	0.43	%	27.25	%	to	27.06	%
2006	0.60	%	to	0.75	%	5,388		2345.86	to	232.95		2,616,531	1.97	%	45.75	%	to	45.54	%
2005	0.60	%	to	0.75	%	5,119		1609.46	to	160.06		1,257,866	1.09	%	31.15	%	to	30.96	%
Investors Growth Stock Series - Initial Class (MIGIC)
2009	0.60	%	to	0.75	%	4,471		1341.62	to	132.83		723,505	0.77	%	38.72	%	to	38.51	%
2008	0.60	%	to	0.75	%	4,507		967.15	to	95.9		507,212	0.59	%	-37.25	%	to	-37.35	%
2007	0.60	%	to	0.75	%	4,862		1541.29	to	153.05		862,693	0.32	%	10.69	%	to	10.52	%
2006	0.60	%	to	0.75	%	5,315		1392.46	to	138.48		844,070	0.00	%	6.93	%	to	6.77	%
2005	0.60	%	to	0.75	%	5,019		1302.17	to	129.7		696,805	0.36	%	3.87	%	to	3.71	%
Value Series - Initial Class (MVFIC)
2009	0.60	%	to	0.75	%	15,134		1574.81	to	155.91		2,912,845	1.35	%	21.98	%	to	21.8	%
2008	0.60	%	to	0.75	%	16,210		1291.03	to	128.01		2,558,791	1.31	%	-32.99	%	to	-33.09	%
2007	0.60	%	to	0.75	%	18,297		1926.52	to	191.31		4,318,143	0.94	%	7.26	%	to	7.1	%
2006	0.60	%	to	0.75	%	17,085		1796.14	to	178.63		3,644,662	1.06	%	20.12	%	to	19.94	%
2005	0.60	%	to	0.75	%	14,577		1495.29	to	148.93		2,525,353	0.78	%	6.02	%	to	5.87	%
Core Plus Fixed Income Portfolio - Class I (MSVFI)
2009	0.60	%	to	0.75	%	5,802		1151.76	to	114.03		781,170	9.56	%	8.99	%	to	8.83	%
2008	0.60	%	to	0.75	%	9,326		1056.77	to	104.78		1,308,628	4.68	%	-10.74	%	to	-10.88	%
2007	0.60	%	to	0.75	%	9,965		1183.94	to	117.57		1,564,281	3.46	%	4.82	%	to	4.66	%
2006	0.60	%	to	0.75	%	9,217		1129.51	to	112.33		1,174,089	3.96	%	3.11	%	to	2.96	%
2005	0.60	%	to	0.75	%	9,174		1095.42	to	109.1		1,127,287	3.50	%	3.59	%	to	3.44	%
Emerging Markets Debt Portfolio - Class I (MSEM)
2009	0.60	%	to	0.75	%	909		1770.61	to	175.3		384,950	8.41	%	29.43	%	to	29.24	%
2008	0.60	%	to	0.75	%	1,163		1368	to	135.64		365,135	7.77	%	-15.49	%	to	-15.61	%
2007	0.60	%	to	0.75	%	1,307		1618.66	to	160.74		467,623	6.93	%	5.89	%	to	5.73	%
2006	0.60	%	to	0.75	%	1,475		1528.6	to	152.02		333,584	8.56	%	10.15	%	to	9.98	%
2005	0.60	%	to	0.75	%	1,667		1387.79	to	138.23		365,662	7.53	%	11.58	%	to	11.41	%
U.S. Real Estate Portfolio - Class I (MSVRE)
2009	0.60	%	to	0.75	%	529		1808.38	to	179.04		513,453	5.76	%	27.59	%	to	27.4	%
2008	0.60	%	to	0.75	%	17,854		1417.37	to	140.54		2,819,856	3.47	%	-38.27	%	to	-38.36	%
2007	0.60	%	to	0.75	%	23,396		2295.96	to	228		5,815,477	1.10	%	-17.57	%	to	-17.69	%
2006	0.60	%	to	0.75	%	24,171		2785.34	to	277.01		7,516,293	1.05	%	37.22	%	to	37.02	%
2005	0.60	%	to	0.75	%	21,075		2029.8	to	202.17		4,713,181	1.18	%	16.35	%	to	16.18	%
AllianceBernstein NVIT Global Fixed Income Fund - Class III (NVAGF3)
2009	0.65	%	to	0.75	%	1,055		113.7	to	113.62		119,893	6.73	%	13.7	%	to	13.62	%	*
AllianceBernstein NVIT Global Fixed Income Fund - Class VI (NVAGF6)
2009	0.60	%	to	0.75	%	87		1137.41	to	113.63		94,860	7.10	%	13.74	%	to	13.63	%	*
American Century NVIT Multi Cap Value Fund - Class I (NVAMV1)
2009	0.65	%	to	0.75	%	114		125.1	to	125.02		14,257	0.64	%	25.1	%	to	25.02	%	*
American Funds NVIT Asset Allocation Fund - Class II (GVAAA2)
2009	0.75	%				2,528		94.48				238,838	0.09	%	22.49	%
2008	0.75	%				2,079		77.13				160,345	3.69	%	-30.3	%
2007	0.75	%				1,044		110.66				115,502	2.96	%	5.34	%
2006	0.75	%				288		105.05				30,253	1.92	%	5.05	%				*
American Funds NVIT Bond Fund - Class II (GVABD2)
2009	0.75	%				3,185		106.72				339,917	0.37	%	11.31	%
2008	0.75	%				2,962		95.88				284,015	5.63	%	-10.55	%
2007	0.75	%				2,900		107.18				310,864	10.19	%	2.21	%
2006	0.75	%				147		104.87				15,416	0.01	%	4.87	%				*

(Continued)

PMLIC VL Separate Account (NOTES TO FINANCIAL STATEMENTS, Continued) December 31, 2009

	Contract Expense Rate**					Units	Unit Fair Value				Contract Owners’ Equity		Investment Income Ratio***		Total Return****					Inception Date
American Funds NVIT Global Growth Fund - Class II (GVAGG2)
2009	0.75	%				9,470	$	104.82			$	992,619	0.00	%	40.55	%
2008	0.75	%				6,303		74.58				470,075	2.92	%	-39.1	%
2007	0.75	%				3,650		122.45				446,988	3.19	%	13.51	%
2006	0.75	%				432		107.88				46,592	0.16	%	7.88	%				*
American Funds NVIT Growth Fund - Class II (GVAGR2)
2009	0.75	%				11,716		87.35				1,023,433	0.00	%	37.75	%
2008	0.75	%				9,249		63.42				586,558	2.57	%	-44.63	%
2007	0.75	%				2,536		114.53				290,487	0.70	%	11.06	%
2006	0.75	%				977		103.13				100,792	0.93	%	3.13	%				*
American Funds NVIT Growth-Income Fund - Class II (GVAGI2)
2009	0.75	%				2,629		78.49				206,338	0.00	%	29.71	%
2008	0.75	%				1,478		60.51				89,399	2.37	%	-38.53	%
2007	0.75	%				738		98.43				72,608	1.83	%	-1.57	%				*
Federated NVIT High Income Bond Fund - Class I (HIBF)
2009	0.60	%	to	0.75	%	2,426		1444.1	to	142.97		847,125	11.21	%	45.12	%	to	44.91	%
2008	0.60	%	to	0.75	%	2,375		995.07	to	98.66		331,329	8.94	%	-28.42	%	to	-28.53	%
2007	0.60	%	to	0.75	%	3,159		1390.16	to	138.05		630,844	7.16	%	2.51	%	to	2.36	%
2006	0.60	%	to	0.75	%	5,094		1356.06	to	134.86		860,718	7.16	%	9.94	%	to	9.78	%
2005	0.60	%	to	0.75	%	6,710		1233.42	to	122.85		1,112,049	7.68	%	1.77	%	to	1.62	%
Federated NVIT High Income Bond Fund - Class III (HIBF3)
2009	0.65	%	to	0.75	%	14,045		122.55	to	121.98		1,717,221	10.87	%	45.13	%	to	44.99	%
2008	0.65	%	to	0.75	%	8,474		84.44	to	84.13		714,145	8.93	%	-28.56	%	to	-28.64	%
2007	0.65	%	to	0.75	%	9,487		118.21	to	117.89		1,119,687	7.54	%	2.5	%	to	2.39	%
2006	0.65	%	to	0.75	%	7,786		115.33	to	115.14		897,186	8.08	%	9.88	%	to	9.77	%
2005	0.65	%	to	0.75	%	2,418		104.95	to	104.89		253,481	6.50	%	4.95	%	to	4.89	%	*
Gartmore NVIT Emerging Markets Fund - Class I (GEM)
2009	0.60	%	to	0.75	%	1,819		3405.51	to	337.16		1,550,472	1.41	%	62.34	%	to	62.09	%
2008	0.60	%	to	0.75	%	2,027		2097.81	to	208		924,864	1.16	%	-58.01	%	to	-58.08	%
2007	0.60	%	to	0.75	%	2,485		4996.54	to	496.17		2,614,716	0.70	%	44.7	%	to	44.49	%
2006	0.60	%	to	0.75	%	2,474		3452.94	to	343.4		1,582,475	0.68	%	35.9	%	to	35.7	%
2005	0.60	%	to	0.75	%	2,726		2540.74	to	253.06		1,290,632	0.56	%	31.85	%	to	31.65	%
Gartmore NVIT Emerging Markets Fund - Class III (GEM3)
2009	0.60	%	to	0.75	%	19,865		718.95	to	206.96		4,249,988	1.39	%	62.51	%	to	62.26	%
2008	0.60	%	to	0.75	%	21,925		442.42	to	127.54		2,801,405	1.22	%	-55.76	%	to	-58.15	%
2007	0.65	%	to	0.75	%	22,669		305.85	to	304.73		6,918,910	0.70	%	44.6	%	to	44.46	%
2006	0.65	%	to	0.75	%	18,901		211.51	to	210.95		3,992,157	0.70	%	35.76	%	to	35.63	%
2005	0.65	%	to	0.75	%	13,678		155.8	to	155.54		2,128,827	0.54	%	31.8	%	to	31.67	%
Gartmore NVIT Global Utilities Fund - Class I (GVGU1)
2009	0.60	%	to	0.75	%	645		1915.58	to	189.65		429,550	4.22	%	7.36	%	to	7.2	%
2008	0.60	%	to	0.75	%	734		1784.21	to	176.91		411,192	3.18	%	-33.34	%	to	-33.44	%
2007	0.60	%	to	0.75	%	1,139		2676.63	to	265.8		876,435	2.65	%	19.71	%	to	19.53	%
2006	0.60	%	to	0.75	%	985		2235.92	to	222.37		526,305	2.73	%	36.74	%	to	36.54	%
2005	0.60	%	to	0.75	%	981		1635.15	to	162.86		375,256	2.25	%	5.75	%	to	5.6	%
Gartmore NVIT Global Utilities Fund - Class III (GVGU)
2009	0.65	%	to	0.75	%	6,858		156.82	to	155.94		1,072,385	4.04	%	7.28	%	to	7.17	%
2008	0.65	%	to	0.75	%	8,429		146.18	to	145.5		1,229,538	3.27	%	-33.34	%	to	-33.4	%
2007	0.65	%	to	0.75	%	10,028		219.28	to	218.48		2,195,734	2.46	%	19.61	%	to	19.49	%
2006	0.65	%	to	0.75	%	11,033		183.33	to	182.85		2,020,297	2.88	%	36.7	%	to	36.57	%
2005	0.65	%	to	0.75	%	7,071		134.11	to	133.89		947,713	2.32	%	5.79	%	to	5.69	%

(Continued)

PMLIC VL Separate Account (NOTES TO FINANCIAL STATEMENTS, Continued) December 31, 2009

	Contract Expense Rate**					Units	Unit Fair Value				Contract Owners’ Equity		Investment Income Ratio***		Total Return****					Inception Date
Gartmore NVIT International Equity Fund - Class VI (NVIE6)
2009	0.65	%	to	0.75	%	7,127	$	70.53	to	70.41	$	502,101	0.32	%	28.61	%	to	28.48	%
2008	0.65	%	to	0.75	%	669		54.84	to	54.8		36,687	2.21	%	-45.16	%	to	-45.2	%	*
Neuberger Berman NVIT Multi Cap Opportunities Fund - Class I (NVNMO1)
2009	0.60	%	to	0.75	%	162,175		784.8	to	78.28		16,452,228	0.13	%	52.05	%	to	51.82	%
Neuberger Berman NVIT Socially Responsible Fund - Class II (NVNSR2)
2009	0.65	%	to	0.75	%	222		80.2	to	80.07		17,795	0.41	%	30.42	%	to	30.29	%
2008	0.65	%	to	0.75	%	137		61.5	to	61.46		8,436	0.41	%	-38.5	%	to	-38.54	%	*
NVIT Cardinal Aggressive Fund - Class I (NVCRA1)
2009	0.75	%				3,609		81.93				295,672	1.36	%	28.33	%
2008	0.75	%				3,325		63.84				212,266	1.27	%	-36.16	%				*
NVIT Cardinal Balanced Fund - Class I (NVCRB1)
2009	0.75	%				81		94.74				7,674	5.65	%	18.99	%
2008	0.75	%				14		79.62				1,140	0.74	%	-20.38	%				*
NVIT Cardinal Capital Appreciation Fund - Class I (NVCCA1)
2009	0.75	%				3,178		89.13				283,248	3.76	%	23.32	%
2008	0.75	%				326		72.27				23,569	1.33	%	-27.73	%				*
NVIT Cardinal Conservative Fund - Class I (NVCCN1)
2009	0.75	%				122		102.23				12,472	2.59	%	12.37	%
2008	0.75	%				120		90.97				10,896	0.70	%	-9.03	%				*
NVIT Cardinal Moderate Fund - Class I (NVCMD1)
2009	0.75	%				3,806		91.9				349,754	2.59	%	21.09	%
2008	0.75	%				1,060		75.89				80,383	0.63	%	-24.11	%				*
NVIT Cardinal Moderately Aggressive Fund - Class I (NVCMA1)
2009	0.75	%				6,581		86.29				567,869	4.04	%	25.74	%
2008	0.75	%				337		68.62				23,111	1.89	%	-31.38	%				*
NVIT Cardinal Moderately Conservative Fund - Class I (NVCMC1)
2009	0.75	%				35		97.31				3,406	2.27	%	16.76	%
2008	0.75	%				62		83.34				5,187	1.46	%	-16.66	%				*
NVIT Core Bond Fund - Class I (NVCBD1)
2009	0.65	%	to	0.75	%	1,671		107.02	to	106.84		178,672	2.98	%	8.08	%	to	7.97	%
2008	0.65	%	to	0.75	%	1,889		99.02	to	98.96		187,031	2.12	%	-0.98	%	to	-1.04	%	*
NVIT Core Plus Bond Fund - Class I (NVLCP1)
2009	0.75	%				220		114.57				25,205	3.58	%	15.75	%
2008	0.75	%				433		98.98				42,858	1.75	%	-1.02	%				*
NVIT Fund - Class IV (TRF4)
2009	0.00	%	to	0.75	%	120,329		7234.28	to	251.13		92,619,075	1.36	%	25.94	%	to	25	%
2008	0.00	%	to	0.75	%	134,973		5744.05	to	200.9		82,191,405	1.44	%	-41.55	%	to	-41.99	%
2007	0.00	%	to	0.75	%	149,511		9827.16	to	346.3		153,166,807	1.06	%	8.18	%	to	7.37	%
2006	0.00	%	to	0.75	%	163,814		9083.77	to	322.53		152,729,328	1.08	%	13.63	%	to	12.78	%
2005	0.00	%	to	0.75	%	180,931		7994.25	to	285.97		147,435,373	0.91	%	7.44	%	to	6.64	%
NVIT Global Financial Services Fund - Class I (GVGF1)
2009	0.60	%	to	0.75	%	964		1465.04	to	145.05		164,101	1.29	%	30.97	%	to	30.77	%
2008	0.60	%	to	0.75	%	1,077		1118.65	to	110.92		143,104	1.93	%	-46.6	%	to	-46.68	%
2007	0.60	%	to	0.75	%	1,185		2094.7	to	208.01		292,425	2.66	%	-1.65	%	to	-1.8	%
2006	0.60	%	to	0.75	%	1,502		2129.8	to	211.81		457,003	1.85	%	19.6	%	to	19.42	%
2005	0.60	%	to	0.75	%	1,253		1780.72	to	177.36		326,653	2.03	%	10.49	%	to	10.32	%
NVIT Global Financial Services Fund - Class III (GVGFS)
2009	0.65	%	to	0.75	%	3,182		106.78	to	106.18		339,140	1.19	%	31.08	%	to	30.95	%
2008	0.65	%	to	0.75	%	3,336		81.46	to	81.08		271,329	2.09	%	-46.56	%	to	-46.62	%
2007	0.65	%	to	0.75	%	2,656		152.44	to	151.88		404,427	3.30	%	-1.77	%	to	-1.86	%
2006	0.65	%	to	0.75	%	5,642		108.84	to	108.55		612,790	0.00	%	2.04	%	to	1.94	%
2005	0.65	%	to	0.75	%	4,921		106.66	to	106.49		534,450	0.00	%	7.72	%	to	7.62	%

(Continued)

PMLIC VL Separate Account (NOTES TO FINANCIAL STATEMENTS, Continued) December 31, 2009

	Contract Expense Rate**					Units	Unit Fair Value				Contract Owners’ Equity		Investment Income Ratio***		Total Return****					Inception Date
NVIT Government Bond Fund - Class I (GBF)
2009	0.75	%				4,008	$	128.22			$	513,895	4.13	%	1.92	%
2008	0.75	%				5,626		125.8				707,775	4.32	%	6.91	%
2007	0.75	%				5,229		117.66				615,277	4.49	%	6.35	%
2006	0.75	%				4,897		110.64				541,768	4.29	%	2.57	%
2005	0.75	%				3,214		107.86				346,638	3.88	%	2.49	%
NVIT Government Bond Fund - Class IV (GBF4)
2009	0.00	%	to	0.75	%	59,941		5912.8	to	261.11		24,159,764	3.51	%	2.69	%	to	1.92	%
2008	0.00	%	to	0.75	%	62,329		5758.07	to	256.19		25,195,143	4.25	%	7.62	%	to	6.81	%
2007	0.00	%	to	0.75	%	71,643		5350.61	to	239.85		25,907,305	4.46	%	7.26	%	to	6.46	%
2006	0.00	%	to	0.75	%	76,487		4988.27	to	225.3		25,407,189	4.11	%	3.34	%	to	2.57	%
2005	0.00	%	to	0.75	%	79,485		4827.11	to	219.66		25,641,945	3.70	%	3.17	%	to	2.41	%
NVIT Growth Fund - Class IV (CAF4)
2009	0.60	%	to	0.75	%	140,849		989.86	to	97.27		18,405,225	0.58	%	32.82	%	to	32.62	%
2008	0.60	%	to	0.75	%	158,183		745.25	to	73.34		15,578,987	0.26	%	-39.15	%	to	-39.24	%
2007	0.60	%	to	0.75	%	170,866		1224.77	to	120.71		27,660,164	0.18	%	18.84	%	to	18.66	%
2006	0.60	%	to	0.75	%	190,353		1030.63	to	101.73		25,958,306	0.05	%	5.54	%	to	5.38	%
2005	0.60	%	to	0.75	%	206,946		976.56	to	96.54		26,631,211	0.08	%	5.87	%	to	5.71	%
NVIT Health Sciences Fund - Class I (GVGH1)
2009	0.60	%	to	0.75	%	1,036		1464.09	to	144.95		293,054	0.28	%	18.45	%	to	18.27	%
2008	0.60	%	to	0.75	%	1,869		1236.04	to	122.56		372,913	0.29	%	-25.66	%	to	-25.77	%
2007	0.60	%	to	0.75	%	2,103		1662.75	to	165.12		559,904	0.06	%	12.48	%	to	12.31	%
2006	0.60	%	to	0.75	%	2,526		1478.26	to	147.02		1,013,140	0.00	%	2.09	%	to	1.94	%
2005	0.60	%	to	0.75	%	2,685		1447.93	to	144.22		971,300	0.00	%	7.79	%	to	7.63	%
NVIT Health Sciences Fund - Class III (GVGHS)
2009	0.65	%	to	0.75	%	4,136		107.63	to	107.02		443,503	0.31	%	18.34	%	to	18.22	%
2008	0.65	%	to	0.75	%	5,513		90.95	to	90.52		499,743	0.30	%	-25.72	%	to	-25.79	%
2007	0.65	%	to	0.75	%	4,539		122.43	to	121.98		554,249	0.08	%	12.49	%	to	12.38	%
NVIT Investor Destinations Aggressive Fund - Class II (GVIDA)
2009	0.60	%	to	0.75	%	30,827		1506.9	to	147.96		4,612,056	1.27	%	26.44	%	to	26.26	%
2008	0.60	%	to	0.75	%	32,813		1191.75	to	117.19		3,890,635	2.14	%	-37.22	%	to	-37.32	%
2007	0.60	%	to	0.75	%	30,001		1898.33	to	186.96		5,696,603	1.96	%	5.32	%	to	5.16	%
2006	0.60	%	to	0.75	%	23,860		1802.42	to	177.78		4,314,572	2.14	%	16.17	%	to	16	%
2005	0.60	%	to	0.75	%	14,900		1551.52	to	153.26		2,295,653	2.08	%	7.29	%	to	7.13	%
NVIT Investor Destinations Capital Appreciation Fund - Class II (NVDCA2)
2009	0.75	%				9		121.44				1,093	0.72	%	21.44	%				*
NVIT Investor Destinations Conservative Fund - Class II (GVIDC)
2009	0.60	%	to	0.75	%	10,112		1264.21	to	126.34		1,290,185	2.47	%	8.43	%	to	8.27	%
2008	0.60	%	to	0.75	%	8,067		1165.91	to	116.69		956,120	3.33	%	-6.58	%	to	-6.73	%
2007	0.60	%	to	0.75	%	3,953		1248.09	to	125.1		517,209	3.85	%	4.75	%	to	4.59	%
2006	0.60	%	to	0.75	%	3,363		1191.53	to	119.61		445,352	3.10	%	5.53	%	to	5.37	%
2005	0.60	%	to	0.75	%	2,899		1129.08	to	113.51		331,408	2.84	%	2.69	%	to	2.54	%
NVIT Investor Destinations Moderate Fund - Class II (GVIDM)
2009	0.00	%	to	0.75	%	199,162		2407.38	to	138.44		44,488,278	1.58	%	20.37	%	to	18.25	%	*
2008	0.60	%	to	0.75	%	115,641		1179.33	to	117.08		14,101,689	2.88	%	-23.66	%	to	-23.77	%
2007	0.60	%	to	0.75	%	103,981		1544.74	to	153.58		16,636,748	2.72	%	5.02	%	to	4.87	%
2006	0.60	%	to	0.75	%	82,512		1470.85	to	146.46		12,662,728	2.45	%	10.69	%	to	10.52	%
2005	0.60	%	to	0.75	%	68,395		1328.81	to	132.51		9,331,048	2.38	%	4.72	%	to	4.56	%

(Continued)

PMLIC VL Separate Account (NOTES TO FINANCIAL STATEMENTS, Continued) December 31, 2009

	Contract Expense Rate**					Units	Unit Fair Value				Contract Owners’ Equity		Investment Income Ratio***		Total Return****					Inception Date
NVIT Investor Destinations Moderately Aggressive Fund - Class II (GVDMA)
2009	0.60	%	to	0.75	%	163,399	$	1476.18	to	145.4	$	24,599,225	1.53	%	23.65	%	to	23.46	%
2008	0.60	%	to	0.75	%	163,360		1193.85	to	117.77		19,852,890	2.52	%	-31.8	%	to	-31.9	%
2007	0.60	%	to	0.75	%	155,909		1750.56	to	172.95		27,852,303	2.29	%	5.51	%	to	5.35	%
2006	0.60	%	to	0.75	%	119,754		1659.11	to	164.16		20,141,018	2.34	%	13.86	%	to	13.69	%
2005	0.60	%	to	0.75	%	76,925		1457.19	to	144.4		11,457,284	2.21	%	6.43	%	to	6.27	%
NVIT Investor Destinations Moderately Conservative Fund - Class II (GVDMC)
2009	0.60	%	to	0.75	%	11,111		1337.76	to	133.27		1,653,186	1.99	%	13.88	%	to	13.71	%
2008	0.60	%	to	0.75	%	15,086		1174.75	to	117.2		1,935,339	3.18	%	-15.55	%	to	-15.68	%
2007	0.60	%	to	0.75	%	14,050		1391.1	to	139		2,137,412	3.26	%	5.22	%	to	5.06	%
2006	0.60	%	to	0.75	%	10,321		1322.06	to	132.3		1,474,196	2.83	%	7.78	%	to	7.61	%
2005	0.60	%	to	0.75	%	8,852		1226.67	to	122.94		1,180,073	2.63	%	3.86	%	to	3.71	%
NVIT Mid Cap Index Fund - Class I (MCIF)
2009	0.60	%	to	0.75	%	16,859		1689.5	to	167.27		3,206,050	1.10	%	35.94	%	to	35.73	%
2008	0.60	%	to	0.75	%	18,702		1242.85	to	123.23		2,580,573	1.28	%	-36.84	%	to	-36.94	%
2007	0.60	%	to	0.75	%	20,047		1967.89	to	195.42		4,364,270	1.35	%	6.91	%	to	6.75	%
2006	0.60	%	to	0.75	%	19,628		1840.65	to	183.06		3,947,292	1.15	%	9.23	%	to	9.07	%
2005	0.60	%	to	0.75	%	17,840		1685.06	to	167.83		3,355,812	1.07	%	11.43	%	to	11.26	%
NVIT Multi-Manager International Growth Fund - Class III (NVMIG3)
2009	0.65	%	to	0.75	%	20,886		82.89	to	82.75		1,729,422	0.91	%	35.57	%	to	35.44	%
2008	0.65	%	to	0.75	%	40		61.14	to	61.1		2,462	0.36	%	-38.86	%	to	-38.9	%	*
NVIT Multi-Manager International Value Fund - Class III (GVDIV3)
2009	0.60	%	to	0.75	%	127,317		1107.86	to	109.85		17,721,652	2.26	%	29.06	%	to	28.87	%
2008	0.60	%	to	0.75	%	140,630		858.4	to	85.24		14,971,527	1.81	%	-46.65	%	to	-46.73	%
2007	0.60	%	to	0.75	%	148,290		1609.12	to	160.03		29,225,522	2.07	%	2.31	%	to	2.16	%
2006	0.60	%	to	0.75	%	169,162		1572.75	to	156.65		31,620,607	2.02	%	22.01	%	to	21.83	%
2005	0.60	%	to	0.75	%	142,685		1288.99	to	128.58		22,396,340	1.36	%	11.39	%	to	11.22	%
NVIT Multi-Manager International Value Fund - Class IV (GVDIV4)
2009	0.60	%	to	0.75	%	47,692		2716.39	to	264.34		21,124,806	2.13	%	29.11	%	to	28.92	%
2008	0.60	%	to	0.75	%	59,201		2103.89	to	205.04		20,061,144	1.78	%	-46.67	%	to	-46.75	%
2007	0.60	%	to	0.75	%	72,492		3944.99	to	385.05		44,468,736	2.11	%	2.28	%	to	2.12	%
2006	0.60	%	to	0.75	%	85,335		3857.14	to	377.04		50,355,415	2.08	%	22.01	%	to	21.82	%
2005	0.60	%	to	0.75	%	106,745		3161.42	to	309.5		49,858,746	1.24	%	11.3	%	to	11.14	%
NVIT Multi-Manager Large Cap Growth Fund - Class I (NVMLG1)
2009	0.65	%	to	0.75	%	19,082		81.71	to	81.57		1,557,288	1.00	%	28.94	%	to	28.81	%
2008	0.65	%	to	0.75	%	4		63.37	to	63.33		229	0.18	%	-36.63	%	to	-36.67	%	*
NVIT Multi-Manager Large Cap Value Fund - Class I (NVMLV1)
2009	0.65	%	to	0.75	%	17,619		80.24	to	80.1		1,412,102	1.54	%	26.77	%	to	26.64	%
2008	0.65	%	to	0.75	%	507		63.29	to	63.25		32,070	0.81	%	-36.71	%	to	-36.75	%	*
NVIT Multi-Manager Mid Cap Growth Fund - Class I (NVMMG1)
2009	0.60	%	to	0.75	%	428,454		1236.48	to	78.84		48,628,166	0.00	%	23.65	%	to	26.17	%	*
2008	0.65	%	to	0.75	%	4		62.52	to	62.48		220	0.00	%	-37.48	%	to	-37.52	%	*
NVIT Multi-Manager Mid Cap Value Fund - Class II (NVMMV2)
2009	0.65	%	to	0.75	%	60,511		87.22	to	87.07		5,271,721	1.29	%	29.62	%	to	29.49	%
2008	0.65	%	to	0.75	%	18		67.29	to	67.24		1,190	1.70	%	-32.71	%	to	-32.76	%	*
NVIT Multi-Manager Small Cap Growth Fund - Class I (SCGF)
2009	0.60	%	to	0.75	%	12,896		1150.68	to	113.92		1,610,079	0.00	%	26.7	%	to	26.51	%
2008	0.60	%	to	0.75	%	12,402		908.2	to	90.05		1,216,928	0.00	%	-46.74	%	to	-46.82	%
2007	0.60	%	to	0.75	%	11,510		1705.23	to	169.33		2,114,898	0.00	%	9.09	%	to	8.93	%
2006	0.60	%	to	0.75	%	7,850		1563.14	to	155.46		1,266,420	0.00	%	2.59	%	to	2.44	%
2005	0.60	%	to	0.75	%	6,754		1523.66	to	151.76		1,049,465	0.00	%	7.45	%	to	7.29	%

(Continued)

PMLIC VL Separate Account (NOTES TO FINANCIAL STATEMENTS, Continued) December 31, 2009

	Contract Expense Rate**					Units	Unit Fair Value				Contract Owners’ Equity		Investment Income Ratio***		Total Return****					Inception Date
NVIT Multi-Manager Small Cap Value Fund - Class IV (SCVF4)
2009	0.60	%	to	0.75	%	105,222	$	1389.9	to	136.58	$	18,206,897	0.63	%	25.65	%	to	25.47	%
2008	0.60	%	to	0.75	%	122,276		1106.13	to	108.86		17,192,696	1.09	%	-32.68	%	to	-32.78	%
2007	0.60	%	to	0.75	%	142,316		1643.02	to	161.94		29,870,553	1.18	%	-7.48	%	to	-7.62	%
2006	0.60	%	to	0.75	%	157,866		1775.93	to	175.3		36,341,552	0.45	%	16.7	%	to	16.53	%
2005	0.60	%	to	0.75	%	176,842		1521.74	to	150.43		35,271,237	0.06	%	2.45	%	to	2.3	%
NVIT Multi-Manager Small Company Fund - Class IV (SCF4)
2009	0.60	%	to	0.75	%	102,250		1367.82	to	134.41		18,194,207	0.29	%	33.8	%	to	33.6	%
2008	0.60	%	to	0.75	%	123,710		1022.25	to	100.6		16,027,358	0.82	%	-38.56	%	to	-38.65	%
2007	0.60	%	to	0.75	%	142,233		1663.76	to	163.98		29,899,031	0.11	%	1.54	%	to	1.39	%
2006	0.60	%	to	0.75	%	150,845		1638.55	to	161.74		31,093,042	0.11	%	11.37	%	to	11.21	%
2005	0.60	%	to	0.75	%	163,430		1471.2	to	145.44		30,196,507	0.00	%	11.65	%	to	11.48	%
NVIT Multi-Sector Bond Fund - Class I (MSBF)
2009	0.60	%	to	0.75	%	9,975		1254.7	to	124.22		1,534,940	10.39	%	23.64	%	to	23.45	%
2008	0.60	%	to	0.75	%	9,850		1014.84	to	100.62		1,295,458	7.30	%	-17.79	%	to	-17.91	%
2007	0.60	%	to	0.75	%	12,772		1234.39	to	122.58		1,891,433	4.01	%	4	%	to	3.84	%
2006	0.60	%	to	0.75	%	12,056		1186.96	to	118.05		1,719,332	4.29	%	4.21	%	to	4.06	%
2005	0.60	%	to	0.75	%	9,714		1138.98	to	113.44		1,368,395	3.95	%	1.57	%	to	1.42	%
NVIT S&P 500 Index Fund - Class IV (GVEX4)
2009	0.60	%	to	0.75	%	331,907		2928.05	to	285.68		126,149,138	2.38	%	25.46	%	to	25.28	%
2008	0.60	%	to	0.75	%	374,555		2333.76	to	228.04		113,036,809	1.92	%	-37.66	%	to	-37.76	%
2007	0.60	%	to	0.75	%	410,597		3743.89	to	366.38		196,671,685	1.60	%	4.48	%	to	4.32	%
2006	0.60	%	to	0.75	%	448,660		3583.44	to	351.21		205,037,176	1.65	%	14.63	%	to	14.46	%
2005	0.60	%	to	0.75	%	488,766		3125.99	to	306.83		194,582,457	1.60	%	4.12	%	to	3.97	%
NVIT Short Term Bond Fund - Class II (NVSTB2)
2009	0.65	%	to	0.75	%	11,884		105.35	to	105.18		1,251,259	2.94	%	6.42	%	to	6.31	%
2008	0.65	%	to	0.75	%	270		99	to	98.94		26,727	1.58	%	-1	%	to	-1.06	%	*
NVIT Technology & Communications Fund - Class I (GGTC)
2009	0.60	%	to	0.75	%	578		1455.77	to	144.13		244,940	0.00	%	51.55	%	to	51.33	%
2008	0.60	%	to	0.75	%	597		960.56	to	95.24		148,925	0.00	%	-48.88	%	to	-48.96	%
2007	0.60	%	to	0.75	%	1,072		1878.98	to	186.59		442,262	0.00	%	19.37	%	to	19.19	%
2006	0.60	%	to	0.75	%	870		1574.07	to	156.54		200,855	0.00	%	10.51	%	to	10.34	%
2005	0.60	%	to	0.75	%	1,133		1424.42	to	141.87		176,571	0.00	%	-1.11	%	to	-1.26	%
NVIT Technology & Communications Fund - Class III (GGTC3)
2009	0.65	%	to	0.75	%	5,068		109.92	to	109.3		554,685	0.00	%	51.46	%	to	51.31	%
2008	0.65	%	to	0.75	%	4,263		72.58	to	72.24		308,542	0.00	%	-48.92	%	to	-48.97	%
2007	0.65	%	to	0.75	%	4,082		142.08	to	141.56		578,394	0.00	%	19.4	%	to	19.28	%
2006	0.65	%	to	0.75	%	5,206		119	to	118.68		618,360	0.00	%	10.36	%	to	10.25	%
2005	0.65	%	to	0.75	%	6,525		107.82	to	107.64		702,733	0.00	%	-1.16	%	to	-1.25	%
NVIT U.S. Growth Leaders Fund - Class I (GVUG1)
2009	0.60	%	to	0.75	%	7,453		1462.55	to	144.8		1,177,107	0.00	%	25.09	%	to	24.9	%
2008	0.60	%	to	0.75	%	10,337		1169.24	to	115.93		1,289,547	0.00	%	-41.64	%	to	-41.73	%
2007	0.60	%	to	0.75	%	10,241		2003.6	to	198.96		2,207,661	0.00	%	21.75	%	to	21.57	%
2006	0.60	%	to	0.75	%	10,539		1645.68	to	163.67		1,864,404	0.29	%	-0.88	%	to	-1.03	%
2005	0.60	%	to	0.75	%	6,666		1660.34	to	165.37		1,302,141	0.00	%	11.29	%	to	11.13	%
Oppenheimer NVIT Large Cap Growth Fund - Class I (NVOLG1)
2009	0.60	%	to	0.75	%	389		1300.78	to	129.95		92,847	0.20	%	30.08	%	to	29.95	%	*
Templeton NVIT International Value Fund - Class III (NVTIV3)
2009	0.75	%				89		129.69				11,543	0.37	%	29.69	%				*
Van Kampen NVIT Comstock Value Fund - Class IV (EIF4)
2009	0.60	%	to	0.75	%	106,165		1199.68	to	117.89		16,697,703	1.21	%	27.92	%	to	27.73	%
2008	0.60	%	to	0.75	%	125,870		937.84	to	92.3		15,634,305	2.06	%	-37.34	%	to	-37.44	%
2007	0.60	%	to	0.75	%	141,480		1496.75	to	147.52		28,436,288	1.73	%	-2.77	%	to	-2.92	%
2006	0.60	%	to	0.75	%	151,538		1539.45	to	151.96		31,759,847	1.74	%	15.25	%	to	15.07	%
2005	0.60	%	to	0.75	%	160,028		1335.79	to	132.05		29,311,367	1.64	%	3.74	%	to	3.58	%

(Continued)

PMLIC VL Separate Account (NOTES TO FINANCIAL STATEMENTS, Continued) December 31, 2009

	Contract Expense Rate**					Units	Unit Fair Value				Contract Owners’ Equity		Investment Income Ratio***		Total Return****					Inception Date
Van Kampen NVIT Real Estate Fund - Class I (NVRE1)
2009	0.65	%	to	0.75	%	39,256	$	73.08	to	72.96	$	2,865,417	2.46	%	29.99	%	to	29.86	%
2008	0.65	%	to	0.75	%	234		56.22	to	56.18		13,169	3.57	%	-43.78	%	to	-43.82	%	*
VaNVIT Money Market Fund - Class IV (SAM4)
2009	0.00	%	to	0.75	%	261,369		3297.32	to	167.66		59,063,759	0.10	%	0.09	%	to	-0.66	%
2008	0.00	%	to	0.75	%	277,875		3294.21	to	168.77		62,691,091	2.11	%	2.15	%	to	1.38	%
2007	0.00	%	to	0.75	%	279,843		3224.87	to	166.47		59,782,181	4.82	%	4.94	%	to	4.14	%
2006	0.00	%	to	0.75	%	277,898		3073.2	to	159.84		57,699,776	4.56	%	4.67	%	to	3.89	%
2005	0.00	%	to	0.75	%	252,986		2936.04	to	153.86		48,229,509	2.78	%	2.82	%	to	2.05	%
Advisers Management Trust - Short Duration Bond Portfolio - I Class Shares (AMTB)
2009	0.60	%	to	0.75	%	54,523		1656.99	to	161.85		11,404,615	8.04	%	12.65	%	to	12.48	%
2008	0.60	%	to	0.75	%	58,973		1470.93	to	143.89		10,686,079	4.73	%	-13.95	%	to	-14.08	%
2007	0.60	%	to	0.75	%	68,845		1709.33	to	167.47		14,668,779	2.74	%	4.14	%	to	3.98	%
2006	0.60	%	to	0.75	%	72,788		1641.35	to	161.05		14,923,733	3.13	%	3.58	%	to	3.43	%
2005	0.60	%	to	0.75	%	82,241		1584.62	to	155.71		16,000,795	2.86	%	0.84	%	to	0.69	%
V.I. Basic Balanced Fund - Series I (AVB)
2005	0.60	%	to	0.75	%	15,003		1510.36	to	150.43		2,540,277	0.08	%	5.11	%	to	4.95	%
V.I. Basic Value Fund - Series I (AVBVI)
2009	0.60	%	to	0.75	%	323		1209.95	to	119.79		250,184	0.43	%	47.12	%	to	46.9	%
2008	0.60	%	to	0.75	%	15,197		822.44	to	81.55		1,415,463	0.90	%	-52.06	%	to	-52.13	%
2007	0.60	%	to	0.75	%	15,703		1715.45	to	170.35		3,049,274	0.60	%	0.93	%	to	0.78	%
2006	0.60	%	to	0.75	%	15,813		1699.59	to	169.03		3,042,844	0.41	%	12.53	%	to	12.36	%
V.I. Capital Appreciation Fund - Series I (AVCA)
2009	0.60	%	to	0.75	%	2,200		1145.66	to	113.43		267,550	0.72	%	20.35	%	to	20.17	%
2008	0.60	%	to	0.75	%	2,258		951.9	to	94.38		226,808	0.00	%	-42.84	%	to	-42.92	%
2007	0.60	%	to	0.75	%	2,256		1665.25	to	165.36		390,640	0.00	%	11.34	%	to	11.17	%
2006	0.60	%	to	0.75	%	2,210		1495.64	to	148.75		343,574	0.06	%	5.67	%	to	5.51	%
2005	0.60	%	to	0.75	%	2,030		1415.45	to	140.98		286,635	0.09	%	8.19	%	to	8.02	%
V.I. Capital Development Fund - Series I (AVCDI)
2009	0.60	%	to	0.75	%	7,877		1541.3	to	152.6		1,280,886	0.00	%	41.52	%	to	41.31	%
2008	0.60	%	to	0.75	%	8,221		1089.11	to	107.99		944,198	0.00	%	-47.34	%	to	-47.42	%
2007	0.60	%	to	0.75	%	3,391		2068.32	to	205.39		864,111	0.00	%	10.18	%	to	10.01	%
2006	0.60	%	to	0.75	%	2,821		1877.25	to	186.7		683,524	0.00	%	15.82	%	to	15.65	%
VPS Growth and Income Portfolio - Class A (ALVGIA)
2009	0.60	%	to	0.75	%	13,714		1236.25	to	122.39		1,902,208	4.39	%	20.1	%	to	19.92	%
2008	0.60	%	to	0.75	%	17,672		1029.34	to	102.06		2,049,646	2.11	%	-40.96	%	to	-41.05	%
2007	0.60	%	to	0.75	%	20,678		1743.46	to	173.13		4,016,345	1.43	%	4.49	%	to	4.33	%
2006	0.60	%	to	0.75	%	23,141		1668.6	to	165.95		4,292,206	1.36	%	16.59	%	to	16.41	%
2005	0.60	%	to	0.75	%	25,189		1431.21	to	142.55		3,838,046	1.45	%	4.24	%	to	4.09	%
VPS Small/Mid Cap Value Portfolio: Class A (ALVSVA)
2009	0.60	%	to	0.75	%	11,860		1810.77	to	179.27		2,749,403	1.17	%	42	%	to	41.79	%
2008	0.60	%	to	0.75	%	14,011		1275.17	to	126.44		2,157,791	0.75	%	-35.96	%	to	-36.06	%
2007	0.60	%	to	0.75	%	13,917		1991.27	to	197.74		3,263,027	0.94	%	1.09	%	to	0.94	%
2006	0.60	%	to	0.75	%	13,955		1969.75	to	195.9		3,116,027	0.40	%	13.74	%	to	13.57	%
2005	0.60	%	to	0.75	%	12,590		1731.84	to	172.49		2,464,073	0.68	%	6.28	%	to	6.12	%

(Continued)

PMLIC VL Separate Account (NOTES TO FINANCIAL STATEMENTS, Continued) December 31, 2009

	Contract Expense Rate**					Units	Unit Fair Value				Contract Owners’ Equity		Investment Income Ratio***		Total Return****					Inception Date
VP Income & Growth Fund - Class I (ACVIG)
2009	0.60	%	to	0.75	%	9,279	$	1282.44	to	124.21	$	1,299,283	5.39	%	17.39	%	to	17.21	%
2008	0.60	%	to	0.75	%	8,662		1092.46	to	105.97		1,026,660	2.12	%	-34.98	%	to	-35.08	%
2007	0.60	%	to	0.75	%	10,248		1680.14	to	163.22		1,839,959	1.74	%	-0.67	%	to	-0.82	%
2006	0.60	%	to	0.75	%	10,276		1691.44	to	164.56		1,828,849	1.69	%	16.39	%	to	16.21	%
2005	0.60	%	to	0.75	%	9,347		1453.27	to	141.6		1,477,346	1.89	%	4.01	%	to	3.85	%
VP Income & Growth Fund - Class III (ACVIG3)
2007	0.68	%				13,575		185.44	to	184.76		2,512,359	0.63	%	17.29	%	to	17.17	%
VP Inflation Protection Fund - Class II (ACVIP2)
2009	0.60	%	to	0.75	%	17,921		1285.88	to	127.3		2,885,688	1.90	%	9.55	%	to	9.39	%
2008	0.60	%	to	0.75	%	16,799		1173.74	to	116.37		2,345,551	4.77	%	-2.18	%	to	-2.33	%
2007	0.60	%	to	0.75	%	13,169		1199.89	to	119.15		1,854,054	4.49	%	8.83	%	to	8.67	%
2006	0.60	%	to	0.75	%	12,803		1102.5	to	109.64		1,624,404	3.43	%	0.98	%	to	0.83	%
2005	0.60	%	to	0.75	%	14,308		1091.81	to	108.74		1,804,271	4.39	%	0.95	%	to	0.8	%
VP International Fund - Class I (ACVI)
2009	0.60	%	to	0.75	%	544		1374.67	to	135.89		444,321	2.44	%	32.96	%	to	32.77	%
2008	0.60	%	to	0.75	%	1,782		1033.86	to	102.36		462,358	0.88	%	-45.15	%	to	-45.24	%
2007	0.60	%	to	0.75	%	2,778		1885.02	to	186.91		1,188,729	0.64	%	17.35	%	to	17.17	%
2006	0.60	%	to	0.75	%	3,313		1606.37	to	159.52		1,042,520	1.58	%	24.28	%	to	24.09	%
2005	0.60	%	to	0.75	%	3,969		4292.55	to	128.55		873,158	1.11	%	12.58	%	to	12.41	%
VP International Fund - Class III (ACVI3)
2008	0.65	%	to	0.75	%	13,738		101.65	to	101.18		1,392,618	0.84	%	-45.18	%	to	-45.24	%
VP Mid Cap Value Fund - Class I (ACVMV1)
2009	0.65	%	to	0.75	%	5,878		126.9	to	126.31		744,319	3.88	%	29.1	%	to	28.97	%
2008	0.65	%	to	0.75	%	5,470		98.3	to	97.94		536,858	0.07	%	-24.84	%	to	-24.91	%
2007	0.65	%	to	0.75	%	3,449		130.78	to	130.43		450,566	0.72	%	-2.94	%	to	-3.04	%
2006	0.65	%	to	0.75	%	2,012		134.74	to	134.52		270,859	1.05	%	19.52	%	to	19.4	%
2005	0.65	%	to	0.75	%	343		112.74	to	112.66		38,665	1.18	%	12.74	%	to	12.66	%	*
VP Ultra(R) Fund - Class I (ACVU1)
2009	0.60	%	to	0.75	%	391		1008.59	to	99.7		131,903	0.57	%	33.68	%	to	33.47	%
2008	0.60	%	to	0.75	%	17,502		754.51	to	74.7		1,359,258	0.00	%	-41.83	%	to	-41.92	%
2007	0.60	%	to	0.75	%	17,069		1297.1	to	128.61		2,338,237	0.00	%	20.29	%	to	20.11	%
2006	0.60	%	to	0.75	%	18,237		1078.33	to	107.08		2,030,698	0.00	%	-3.85	%	to	-4	%
2005	0.60	%	to	0.75	%	16,999		1121.54	to	111.54		2,016,032	0.00	%	1.56	%	to	1.4	%
VP Value Fund - Class I (ACVV)
2009	0.60	%	to	0.75	%	39,978		1282.88	to	126.82		5,713,475	6.21	%	19.15	%	to	18.97	%
2008	0.60	%	to	0.75	%	44,924		1076.73	to	106.6		5,284,098	2.49	%	-27.21	%	to	-27.32	%
2007	0.60	%	to	0.75	%	50,637		1479.32	to	146.68		8,195,665	1.62	%	-5.71	%	to	-5.85	%
2006	0.60	%	to	0.75	%	54,195		1568.88	to	155.79		9,355,194	1.28	%	17.95	%	to	17.77	%
2005	0.60	%	to	0.75	%	48,615		1330.18	to	132.29		7,102,333	0.73	%	4.41	%	to	4.25	%
VP Vista(SM) Fund - Class I (ACVVS1)
2009	0.65	%	to	0.75	%	107		106.62	to	106.12		11,407	0.00	%	21.68	%	to	21.55	%
2008	0.65	%	to	0.75	%	4,165		87.62	to	87.3		364,258	0.00	%	-48.96	%	to	-49.01	%
2007	0.65	%	to	0.75	%	3,062		171.66	to	171.21		525,010	0.00	%	38.86	%	to	38.72	%
2006	0.65	%	to	0.75	%	1,069		123.62	to	123.42		132,041	0.00	%	8.3	%	to	8.2	%
2005	0.65	%	to	0.75	%	144		114.14	to	114.07		16,429	0.00	%	14.14	%	to	14.07	%	*
Small Cap Stock Index Portfolio - Service Shares (DVSCS)
2009	0.60	%	to	0.75	%	30,885		1667.26	to	163.69		5,322,363	2.96	%	24.28	%	to	24.09	%
2008	0.60	%	to	0.75	%	31,726		1341.55	to	131.91		4,393,379	0.87	%	-31.33	%	to	-31.43	%
2007	0.60	%	to	0.75	%	33,536		1953.53	to	192.37		6,785,668	0.37	%	-1.25	%	to	-1.4	%
2006	0.60	%	to	0.75	%	29,618		1978.31	to	195.1		6,138,847	0.36	%	13.73	%	to	13.56	%
2005	0.60	%	to	0.75	%	24,462		1739.5	to	171.81		4,455,409	0.00	%	6.59	%	to	6.43	%

(Continued)

PMLIC VL Separate Account (NOTES TO FINANCIAL STATEMENTS, Continued) December 31, 2009

	Contract Expense Rate**					Units	Unit Fair Value				Contract Owners’ Equity		Investment Income Ratio***		Total Return****					Inception Date
Stock Index Fund, Inc. - Initial Shares (DSIF)
2009	0.60	%	to	0.75	%	50,267	$	1316.79	to	130.37	$	7,092,217	2.43	%	25.58	%	to	25.39	%
2008	0.60	%	to	0.75	%	53,706		1048.58	to	103.97		6,171,647	2.11	%	-37.52	%	to	-37.61	%
2007	0.60	%	to	0.75	%	61,314		1678.21	to	166.65		11,148,730	1.73	%	4.62	%	to	4.46	%
2006	0.60	%	to	0.75	%	62,009		1604.06	to	159.53		10,690,871	1.67	%	14.81	%	to	14.64	%
2005	0.60	%	to	0.75	%	61,753		1397.16	to	139.16		9,252,054	1.66	%	4.07	%	to	3.91	%
Appreciation Portfolio - Initial Shares (DCAP)
2009	0.60	%	to	0.75	%	19,586		1168.52	to	115.51		2,472,441	3.09	%	21.83	%	to	21.64	%
2008	0.60	%	to	0.75	%	23,951		959.17	to	94.96		2,404,848	2.17	%	-29.97	%	to	-30.08	%
2007	0.60	%	to	0.75	%	31,661		1369.71	to	135.81		4,641,082	1.54	%	6.49	%	to	6.33	%
2006	0.60	%	to	0.75	%	32,783		1286.26	to	127.73		4,497,830	1.54	%	15.78	%	to	15.61	%
2005	0.60	%	to	0.75	%	30,098		1110.93	to	110.48		3,629,774	0.20	%	3.76	%	to	3.6	%
Developing Leaders Portfolio - Initial Shares (DSC)
2009	0.60	%	to	0.75	%	1,120		1059.97	to	104.94		132,111	1.78	%	25.28	%	to	25.1	%
2008	0.60	%	to	0.75	%	993		846.06	to	83.89		100,867	0.88	%	-37.97	%	to	-38.06	%
2007	0.60	%	to	0.75	%	879		1363.87	to	135.44		147,110	0.81	%	-11.59	%	to	-11.73	%
2006	0.60	%	to	0.75	%	1,095		1542.74	to	153.43		222,638	0.42	%	3.15	%	to	3	%
2005	0.60	%	to	0.75	%	1,172		1495.62	to	148.97		247,116	0.00	%	5.17	%	to	5.01	%
Capital Appreciation Fund II - Primary Shares (FVCA2P)
2009	0.60	%	to	0.75	%	767		1297.3	to	128.44		106,650	0.91	%	12.8	%	to	12.63	%
2008	0.60	%	to	0.75	%	559		1150.08	to	114.03		63,754	0.36	%	-29.79	%	to	-29.9	%
2007	0.60	%	to	0.75	%	770		1638.05	to	162.66		125,461	0.84	%	9.22	%	to	9.05	%
2006	0.60	%	to	0.75	%	920		1499.78	to	149.16		163,415	0.76	%	15.52	%	to	15.35	%
2005	0.60	%	to	0.75	%	788		1298.29	to	129.31		122,669	1.07	%	1.31	%	to	1.15	%
Clover Value Fund II - Primary Shares (FALF)
2009	0.65	%	to	0.75	%	389		111.47	to	110.73		43,074	3.16	%	13.97	%	to	13.86	%
2008	0.60	%	to	0.75	%	547		980.85	to	97.25		53,326	1.93	%	-34.19	%	to	-34.29	%
2007	0.60	%	to	0.75	%	612		1490.41	to	148		90,737	1.32	%	-10.21	%	to	-10.34	%
2006	0.60	%	to	0.75	%	644		1659.84	to	165.08		148,881	1.27	%	16.11	%	to	15.94	%
2005	0.60	%	to	0.75	%	597		1429.53	to	142.38		84,882	2.06	%	4.4	%	to	4.24	%
Quality Bond Fund II - Primary Shares (FQB)
2009	0.60	%	to	0.75	%	17,378		1258.27	to	128.86		2,835,959	7.17	%	19.71	%	to	19.54	%
2008	0.60	%	to	0.75	%	19,621		1051.06	to	107.8		2,290,947	5.19	%	-7.84	%	to	-7.98	%
2007	0.60	%	to	0.75	%	24,177		1140.51	to	117.15		2,967,644	4.41	%	4.75	%	to	4.59	%
2006	0.60	%	to	0.75	%	23,630		1088.79	to	112.01		2,724,035	3.99	%	3.53	%	to	3.38	%
2005	0.60	%	to	0.75	%	19,395		1051.64	to	108.35		2,220,225	2.98	%	0.69	%	to	0.54	%
Equity-Income Portfolio - Initial Class (FEIP)
2009	0.60	%	to	0.75	%	222,747		2863.82	to	279.41		88,514,803	2.32	%	29.43	%	to	29.24	%
2008	0.60	%	to	0.75	%	259,698		2212.64	to	216.2		79,594,296	2.48	%	-43	%	to	-43.08	%
2007	0.60	%	to	0.75	%	289,559		3881.67	to	379.86		153,737,798	1.78	%	0.92	%	to	0.77	%
2006	0.60	%	to	0.75	%	310,744		3846.29	to	376.97		161,898,388	3.31	%	19.48	%	to	19.3	%
2005	0.60	%	to	0.75	%	336,566		3219.28	to	315.99		146,730,412	1.64	%	5.23	%	to	5.08	%
High Income Portfolio - Initial Class (FHIP)
2009	0.60	%	to	0.75	%	30,990		1965.61	to	186.05		10,157,812	7.82	%	43.1	%	to	42.88	%
2008	0.60	%	to	0.75	%	43,872		1373.62	to	130.21		8,959,756	8.33	%	-25.43	%	to	-25.55	%
2007	0.60	%	to	0.75	%	54,865		1842.15	to	174.89		14,349,789	7.52	%	2.17	%	to	2.01	%
2006	0.60	%	to	0.75	%	80,318		1803.06	to	171.43		18,791,029	7.64	%	10.57	%	to	10.41	%
2005	0.60	%	to	0.75	%	91,495		1630.65	to	155.27		19,080,223	14.96	%	2.09	%	to	1.94	%

(Continued)

PMLIC VL Separate Account (NOTES TO FINANCIAL STATEMENTS, Continued) December 31, 2009

	Contract Expense Rate**					Units	Unit Fair Value				Contract Owners’ Equity		Investment Income Ratio***		Total Return****					Inception Date
VIP Fund - Asset Manager Portfolio - Initial Class (FAMP)
2009	0.60	%	to	0.75	%	91,759	$	2404.48	to	234.6	$	34,309,106	2.46	%	28.34	%	to	28.15	%
2008	0.60	%	to	0.75	%	101,048		1873.52	to	183.07		29,440,111	2.63	%	-29.15	%	to	-29.25	%
2007	0.60	%	to	0.75	%	115,363		2644.16	to	258.76		45,597,418	6.09	%	14.81	%	to	14.64	%
2006	0.60	%	to	0.75	%	126,173		2303.09	to	225.72		42,928,990	2.72	%	6.68	%	to	6.52	%
2005	0.60	%	to	0.75	%	138,727		2158.94	to	211.91		43,992,466	2.76	%	3.42	%	to	3.27	%
VIP Fund - Contrafund Portfolio - Initial Class (FCP)
2009	0.60	%	to	0.75	%	264,822		3568.22	to	268.67		98,025,774	1.45	%	34.9	%	to	34.7	%
2008	0.60	%	to	0.75	%	305,223		2032.93	to	199.47		83,226,683	0.99	%	-42.86	%	to	-42.94	%
2007	0.60	%	to	0.75	%	329,483		3557.68	to	349.6		156,880,654	0.94	%	16.88	%	to	16.71	%
2006	0.60	%	to	0.75	%	354,948		3043.75	to	299.55		142,858,160	1.28	%	11.05	%	to	10.88	%
2005	0.60	%	to	0.75	%	365,088		2740.88	to	270.14		131,865,992	0.29	%	16.24	%	to	16.07	%
VIP Fund - Energy Portfolio - Service Class 2 (FNRS2)
2009	0.65	%	to	0.75	%	10,790		149.83	to	149.13		1,612,544	0.27	%	46.62	%	to	46.47	%
2008	0.65	%	to	0.75	%	9,988		102.19	to	101.82		1,018,628	0.00	%	-54.7	%	to	-54.75	%
2007	0.65	%	to	0.75	%	8,579		225.59	to	224.99		1,933,441	0.12	%	44.69	%	to	44.55	%
2006	0.65	%	to	0.75	%	6,071		155.91	to	155.65		945,548	0.72	%	15.86	%	to	15.75	%
2005	0.65	%	to	0.75	%	2,430		134.56	to	134.47		326,843	0.85	%	34.56	%	to	34.47	%	*
VIP Fund - Equity-Income Portfolio - Service Class (FEIS)
2009	0.75	%				25,434		126.36				3,213,783	2.96	%	29.06	%
2008	0.75	%				25,036		97.91				2,450,897	2.59	%	-43.13	%
2007	0.75	%				22,053		172.17				3,796,843	1.82	%	0.66	%
2006	0.75	%				18,502		171.05				3,164,664	3.04	%	19.18	%
2005	0.75	%				11,468		143.51				1,645,778	1.07	%	4.97	%
VIP Fund - Freedom Fund 2010 Portfolio - Service Class (FF10S)
2009	0.65	%	to	0.75	%	3,157		116.31	to	115.77		366,408	4.03	%	23.35	%	to	23.23	%
2008	0.65	%	to	0.75	%	3,319		94.29	to	93.95		312,524	2.45	%	-25.56	%	to	-25.64	%
2007	0.65	%	to	0.75	%	4,370		126.67	to	126.34		553,045	3.35	%	7.94	%	to	7.83	%
2006	0.65	%	to	0.75	%	1,284		117.36	to	117.16		150,734	1.73	%	9.07	%	to	8.96	%
2005	0.65	%	to	0.75	%	1,252		107.6	to	107.52		134,721	0.52	%	7.6	%	to	7.52	%	*
VIP Fund - Freedom Fund 2020 Portfolio - Service Class (FF20S)
2009	0.65	%	to	0.75	%	10,411		115.13	to	114.59		1,195,368	4.98	%	27.94	%	to	27.81	%
2008	0.65	%	to	0.75	%	8,101		89.99	to	89.66		727,539	2.71	%	-33.15	%	to	-33.21	%
2007	0.65	%	to	0.75	%	6,538		134.6	to	134.25		878,659	2.43	%	9.45	%	to	9.34	%
2006	0.65	%	to	0.75	%	3,434		122.98	to	122.78		421,728	1.54	%	11.09	%	to	10.98	%
2005	0.65	%	to	0.75	%	2,865		110.71	to	110.64		317,008	0.74	%	10.71	%	to	10.64	%	*
VIP Fund - Freedom Fund 2030 Portfolio - Service Class (FF30S)
2009	0.65	%	to	0.75	%	9,881		112.54	to	112.02		1,108,060	2.77	%	30.55	%	to	30.42	%
2008	0.65	%	to	0.75	%	8,736		86.2	to	85.89		751,003	2.15	%	-38.48	%	to	-38.54	%
2007	0.65	%	to	0.75	%	8,209		140.12	to	139.75		1,147,827	2.68	%	10.48	%	to	10.37	%
2006	0.65	%	to	0.75	%	2,127		126.82	to	126.61		269,394	2.41	%	12.42	%	to	12.31	%
2005	0.65	%	to	0.75	%	730		112.81	to	112.74		82,365	0.90	%	12.81	%	to	12.74	%	*
VIP Fund - Growth Portfolio - Initial Class (FGP)
2009	0.60	%	to	0.75	%	333,190		2438.03	to	237.87		109,607,553	0.45	%	27.52	%	to	27.33	%
2008	0.60	%	to	0.75	%	380,893		1911.89	to	186.82		98,116,407	0.82	%	-47.48	%	to	-47.56	%
2007	0.60	%	to	0.75	%	417,459		3640.57	to	356.27		203,857,644	0.82	%	26.2	%	to	26.01	%
2006	0.60	%	to	0.75	%	461,606		2884.74	to	282.73		178,505,394	0.39	%	6.21	%	to	6.05	%
2005	0.60	%	to	0.75	%	502,778		2716	to	266.59		182,818,370	0.51	%	5.17	%	to	5.01	%

(Continued)

PMLIC VL Separate Account (NOTES TO FINANCIAL STATEMENTS, Continued) December 31, 2009

	Contract Expense Rate**					Units	Unit Fair Value				Contract Owners’ Equity		Investment Income Ratio***		Total Return****					Inception Date
VIP Fund - Growth Portfolio - Service Class (FGS)
2009	0.75	%				15,534	$	119.36			$	1,854,183	0.44	%	27.19	%
2008	0.75	%				16,514		93.85				1,549,717	0.78	%	-47.63	%
2007	0.75	%				14,322		179.19				2,566,418	0.58	%	25.92	%
2006	0.75	%				13,173		142.31				1,874,679	0.21	%	5.94	%
2005	0.75	%				8,095		134.34				1,087,517	0.31	%	4.89	%
VIP Fund - High Income Portfolio - Initial Class R (FHIPR)
2009	0.65	%	to	0.75	%	38,892		105.01	to	104.73		4,079,165	8.46	%	42.88	%	to	42.74	%
2008	0.65	%	to	0.75	%	33,979		73.49	to	73.37		2,495,409	9.07	%	-25.37	%	to	-25.44	%
2007	0.65	%	to	0.75	%	34,486		98.48	to	98.41		3,395,178	10.69	%	-1.52	%	to	-1.59	%	*
VIP Fund - Investment Grade Bond Portfolio - Initial Class (FIGBP)
2009	0.60	%	to	0.75	%	128,777		2358.94	to	230.42		38,476,630	9.25	%	15.03	%	to	14.86	%
2008	0.60	%	to	0.75	%	138,130		2050.71	to	200.61		35,209,804	4.47	%	-3.83	%	to	-3.97	%
2007	0.60	%	to	0.75	%	181,072		2132.34	to	208.91		46,640,056	4.31	%	3.72	%	to	3.56	%
2006	0.60	%	to	0.75	%	209,573		2055.87	to	201.72		50,833,390	3.88	%	3.73	%	to	3.57	%
2005	0.60	%	to	0.75	%	199,063		1982.01	to	194.77		47,170,260	3.59	%	1.58	%	to	1.43	%
VIP Fund - Investment Grade Bond Portfolio - Service Class (FIGBS)
2009	0.75	%				10,156		129.79				1,318,177	10.81	%	14.81	%
2008	0.75	%				10,024		113.05				1,133,223	3.99	%	-4.07	%
2007	0.75	%				10,782		117.84				1,270,541	4.04	%	3.43	%
2006	0.75	%				10,341		113.94				1,178,224	3.44	%	3.52	%
2005	0.75	%				8,327		110.06				916,473	3.11	%	1.32	%
VIP Fund - Mid Cap Portfolio - Service Class (FMCS)
2009	0.60	%	to	0.75	%	44,102		2198.09	to	217.62		11,734,551	0.64	%	39.18	%	to	38.97	%
2008	0.60	%	to	0.75	%	50,517		1579.35	to	156.6		9,557,589	0.36	%	-39.87	%	to	-39.96	%
2007	0.60	%	to	0.75	%	52,370		2626.58	to	260.83		16,478,100	0.71	%	14.79	%	to	14.62	%
2006	0.60	%	to	0.75	%	53,198		2288.11	to	227.56		14,488,640	0.25	%	11.92	%	to	11.75	%
2005	0.60	%	to	0.75	%	49,974		2044.44	to	203.63		12,334,023	0.00	%	17.5	%	to	17.32	%
VIP Fund - Overseas Portfolio - Initial Class (FOP)
2009	0.60	%	to	0.75	%	55,221		1898.89	to	185.48		18,231,555	2.10	%	25.77	%	to	25.58	%
2008	0.60	%	to	0.75	%	69,280		1509.77	to	147.69		17,824,415	2.52	%	-44.14	%	to	-44.23	%
2007	0.60	%	to	0.75	%	88,555		2702.85	to	264.8		37,847,405	3.27	%	16.61	%	to	16.43	%
2006	0.60	%	to	0.75	%	106,054		2317.92	to	227.43		37,412,374	0.89	%	17.38	%	to	17.2	%
2005	0.60	%	to	0.75	%	130,400		1974.8	to	194.06		37,349,783	0.70	%	18.34	%	to	18.16	%
VIP Fund - Overseas Portfolio - Initial Class R (FOPR)
2009	0.60	%	to	0.75	%	149,431		1265.25	to	125.45		22,429,097	2.34	%	25.85	%	to	25.66	%
2008	0.60	%	to	0.75	%	154,536		1005.39	to	99.84		18,340,348	2.72	%	-44.15	%	to	-44.23	%
2007	0.60	%	to	0.75	%	150,134		1800.2	to	179.03		32,578,014	3.27	%	16.65	%	to	16.47	%
2006	0.60	%	to	0.75	%	145,516		1543.24	to	153.71		27,032,323	0.81	%	17.31	%	to	17.14	%
2005	0.60	%	to	0.75	%	137,020		1315.47	to	131.22		21,341,056	0.60	%	18.4	%	to	18.23	%
VIP Fund - Overseas Portfolio - Service Class (FOS)
2009	0.75	%				458		175.24				80,261	2.26	%	25.49	%
2008	0.75	%				634		139.64				88,602	2.25	%	-44.28	%
2007	0.75	%				948		250.64				237,571	3.11	%	16.33	%
2006	0.75	%				1,049		215.46				226,088	0.81	%	17.07	%
2005	0.75	%				1,304		184.05				239,921	0.59	%	18.09	%
VIP Fund - Overseas Portfolio - Service Class 2 R (FO2R)
2005	0.75	%				6,705		130.98				878,406	0.37	%	18.04	%

(Continued)

PMLIC VL Separate Account (NOTES TO FINANCIAL STATEMENTS, Continued) December 31, 2009

	Contract Expense Rate**					Units	Unit Fair Value				Contract Owners’ Equity		Investment Income Ratio***		Total Return****					Inception Date
VIP Fund - Overseas Portfolio - Service Class R (FOSR)
2009	0.75	%				16,574	$	124.76			$	2,067,777	2.93	%	25.55	%
2008	0.75	%				15,108		99.37				1,500,769	2.85	%	-44.3	%
2007	0.75	%				12,637		178.4				2,254,519	3.20	%	16.34	%
2006	0.75	%				10,294		153.34				1,578,430	0.61	%	17.07	%
VIP Fund - Value Strategies Portfolio - Service Class (FVSS)
2009	0.60	%	to	0.75	%	10,974		1582.95	to	156.72		2,094,978	0.63	%	56.46	%	to	56.22	%
2008	0.60	%	to	0.75	%	10,420		1011.76	to	100.32		1,220,851	0.68	%	-51.47	%	to	-51.54	%
2007	0.60	%	to	0.75	%	11,327		2084.71	to	207.02		2,741,821	0.81	%	4.96	%	to	4.81	%
2006	0.60	%	to	0.75	%	10,422		1986.11	to	197.52		2,392,941	0.49	%	15.5	%	to	15.33	%
2005	0.60	%	to	0.75	%	11,040		1719.52	to	171.27		2,189,379	0.00	%	1.94	%	to	1.79	%
Franklin Rising Dividends Securities Fund - Class 1 (FTVRDI)
2009	0.60	%	to	0.75	%	39,612		1343.59	to	133.02		6,134,939	1.83	%	16.97	%	to	16.79	%
2008	0.60	%	to	0.75	%	49,884		1148.67	to	113.89		6,575,907	2.05	%	-27.38	%	to	-27.49	%
2007	0.60	%	to	0.75	%	55,089		1581.75	to	157.07		9,896,092	2.41	%	-3	%	to	-3.15	%
2006	0.60	%	to	0.75	%	57,462		1630.69	to	162.18		10,654,504	1.13	%	16.73	%	to	16.55	%
2005	0.60	%	to	0.75	%	61,187		1397	to	139.14		9,574,564	0.96	%	3.06	%	to	2.91	%
Franklin Small Cap Value Securities Fund - Class 1 (FTVSVI)
2009	0.60	%	to	0.75	%	30,252		1732.72	to	171.55		6,000,085	2.20	%	28.77	%	to	28.58	%
2008	0.60	%	to	0.75	%	33,596		1345.61	to	133.42		5,159,296	1.44	%	-33.27	%	to	-33.37	%
2007	0.60	%	to	0.75	%	35,735		2016.55	to	200.25		8,178,342	0.86	%	-2.72	%	to	-2.87	%
2006	0.60	%	to	0.75	%	36,733		2073.03	to	206.17		8,565,153	0.83	%	16.6	%	to	16.43	%
2005	0.60	%	to	0.75	%	34,003		1777.85	to	177.08		6,889,528	0.86	%	8.34	%	to	8.18	%
Templeton Developing Markets Securities Fund - Class 3 (FTVDM3)
2009	0.65	%	to	0.75	%	16,508		167.41	to	166.63		2,756,076	4.61	%	71.52	%	to	71.34	%
2008	0.65	%	to	0.75	%	13,515		97.61	to	97.25		1,316,120	2.88	%	-52.98	%	to	-53.03	%
2007	0.65	%	to	0.75	%	13,184		207.58	to	207.02		2,732,875	2.14	%	27.86	%	to	27.73	%
2006	0.65	%	to	0.75	%	7,730		162.35	to	162.08		1,253,547	1.15	%	27.34	%	to	27.21	%
2005	0.65	%	to	0.75	%	4,063		127.49	to	127.41		517,685	0.07	%	27.49	%	to	27.41	%	*
Templeton Foreign Securities Fund - Class 1 (TIF)
2009	0.60	%	to	0.75	%	2,527		1936.48	to	191.72		1,436,416	3.79	%	36.52	%	to	36.32	%
2008	0.60	%	to	0.75	%	3,391		1418.46	to	140.65		1,116,918	2.62	%	-40.59	%	to	-40.68	%
2007	0.60	%	to	0.75	%	4,015		2387.69	to	237.1		2,157,443	2.10	%	15.09	%	to	14.92	%
2006	0.60	%	to	0.75	%	4,317		2074.59	to	206.32		1,837,323	1.37	%	20.97	%	to	20.79	%
2005	0.60	%	to	0.75	%	5,324		1714.94	to	170.81		1,603,003	1.31	%	9.82	%	to	9.65	%
Templeton Global Bond Securities Fund - Class 3 (FTVGI3)
2009	0.65	%	to	0.75	%	13,754		151.4	to	150.69		2,076,201	15.63	%	17.92	%	to	17.8	%
2008	0.65	%	to	0.75	%	12,536		128.39	to	127.92		1,605,824	3.93	%	5.52	%	to	5.41	%
2007	0.65	%	to	0.75	%	7,296		121.68	to	121.35		886,275	2.83	%	10.31	%	to	10.2	%
2006	0.65	%	to	0.75	%	4,632		110.3	to	110.12		510,397	3.41	%	12.11	%	to	12	%
2005	0.65	%	to	0.75	%	1,674		98.39	to	98.32		164,647	1.28	%	-1.61	%	to	-1.68	%	*
VIP Founding Funds Allocation Fund - Class 2 (FTVFA2)
2009	0.75	%				94		85.62				8,048	8.69	%	29.28	%
2008	0.75	%				5		66.23				351	2.64	%	-33.77	%				*
International Portfolio - S Class Shares (AMINS)
2009	0.75	%				15		104.16				1,458	0.02	%	33.51	%
2008	0.65	%	to	0.75	%	4,896		78.31	to	78.02		382,454	0.00	%	-46.78	%	to	-46.84	%
2007	0.65	%	to	0.75	%	7,201		147.15	to	146.76		1,057,420	2.69	%	2.54	%	to	2.44	%
2006	0.65	%	to	0.75	%	3,252		143.5	to	143.27		466,192	0.25	%	22.66	%	to	22.53	%
2005	0.65	%	to	0.75	%	616		117	to	116.92		72,003	0.16	%	17	%	to	16.92	%	*

(Continued)

PMLIC VL Separate Account (NOTES TO FINANCIAL STATEMENTS, Continued) December 31, 2009

	Contract Expense Rate**					Units	Unit Fair Value				Contract Owners’ Equity		Investment Income Ration***		Total Return****					Inception Date
Mid-Cap Growth Portfolio - I Class Shares (AMCG)
2009	0.60	%	to	0.75	%	203	$	1644.39	to	162.8	$	158,984	0.00	%	30.81	%	to	30.62	%
2008	0.60	%	to	0.75	%	6,626		1257.07	to	124.64		1,051,885	0.00	%	-43.71	%	to	-43.79	%
2007	0.60	%	to	0.75	%	5,229		2233.14	to	221.76		1,539,406	0.00	%	21.79	%	to	21.61	%
2006	0.60	%	to	0.75	%	3,483		1833.58	to	182.35		775,995	0.00	%	14.01	%	to	13.84	%
2005	0.60	%	to	0.75	%	3,023		1608.26	to	160.18		541,510	0.00	%	13.06	%	to	12.89	%
Partners Portfolio - I Class Shares (AMTP)
2009	0.60	%	to	0.75	%	5,536		1203.56	to	118.27		3,518,851	0.73	%	55.14	%	to	54.91	%
2008	0.60	%	to	0.75	%	129,860		1583.72	to	76.35		15,078,612	0.53	%	-52.68	%	to	-52.75	%
2007	0.60	%	to	0.75	%	138,527		3346.72	to	161.58		34,328,717	0.64	%	8.68	%	to	8.51	%
2006	0.60	%	to	0.75	%	158,015		3079.47	to	148.9		34,027,708	0.71	%	11.57	%	to	11.4	%
2005	0.60	%	to	0.75	%	173,411		2760.1	to	133.66		33,087,823	0.95	%	17.34	%	to	17.17	%
Regency Portfolio - S Class Shares (AMRS)
2008	0.65	%	to	0.75	%	2,174		70.37	to	70.11		152,658	1.08	%	-46.3	%	to	-46.35	%
2007	0.65	%	to	0.75	%	1,683		131.03	to	130.68		220,309	0.43	%	2.38	%	to	2.28	%
2006	0.65	%	to	0.75	%	1,061		127.98	to	127.77		135,667	0.50	%	10.22	%	to	10.11	%
2005	0.65	%	to	0.75	%	214		116.12	to	116.04		24,775	0.00	%	16.12	%	to	16.04	%	*
Small-Cap Growth Portfolio - S Class Shares (AMFAS)
2009	0.60	%	to	0.75	%	4,775		1096.12	to	108.52		637,906	0.00	%	22.02	%	to	21.84	%
2008	0.60	%	to	0.75	%	5,711		898.31	to	89.07		602,443	0.00	%	-39.84	%	to	-39.93	%
2007	0.60	%	to	0.75	%	6,024		1493.1	to	148.27		1,034,107	0.00	%	-0.09	%	to	-0.24	%
2006	0.60	%	to	0.75	%	5,940		1494.44	to	148.63		1,028,864	0.00	%	4.62	%	to	4.47	%
Socially Responsive Portfolio - I Class Shares (AMSRS)
2009	0.60	%	to	0.75	%	3,912		1401.53	to	138.76		662,956	2.45	%	30.64	%	to	30.44	%
2008	0.60	%	to	0.75	%	5,980		1072.82	to	106.37		679,510	2.18	%	-39.81	%	to	-39.9	%
2007	0.60	%	to	0.75	%	5,851		1782.24	to	176.98		1,100,244	0.09	%	6.97	%	to	6.8	%
2006	0.60	%	to	0.75	%	5,451		1666.17	to	165.7		948,821	0.17	%	13.02	%	to	12.86	%
2005	0.60	%	to	0.75	%	4,176		1474.17	to	146.83		748,034	0.00	%	6.22	%	to	6.06	%
Capital Appreciation Fund/VA - Non-Service Shares (OVGR)
2009	0.60	%	to	0.75	%	31,241		1095.29	to	108.28		3,632,481	0.39	%	43.65	%	to	43.44	%
2008	0.60	%	to	0.75	%	39,286		762.45	to	75.49		3,146,181	0.15	%	-45.84	%	to	-45.93	%
2007	0.60	%	to	0.75	%	41,017		1407.89	to	139.6		6,162,511	0.22	%	13.46	%	to	13.29	%
2006	0.60	%	to	0.75	%	41,327		1240.84	to	123.22		5,452,982	0.34	%	7.3	%	to	7.14	%
2005	0.60	%	to	0.75	%	36,163		1156.38	to	115		4,425,073	0.85	%	4.47	%	to	4.32	%
Global Securities Fund/VA - Class 3 (OVGS3)
2009	0.65	%	to	0.75	%	58,101		134.35	to	133.59		7,771,162	2.60	%	38.79	%	to	38.65	%
2008	0.65	%	to	0.75	%	67,077		96.8	to	96.35		6,469,687	1.53	%	-40.58	%	to	-40.64	%
2007	0.65	%	to	0.75	%	68,253		162.91	to	162.32		11,090,536	1.24	%	5.64	%	to	5.54	%
2006	0.65	%	to	0.75	%	60,153		154.21	to	153.8		9,258,685	0.85	%	16.93	%	to	16.81	%
2005	0.65	%	to	0.75	%	45,095		131.88	to	131.66		5,940,612	0.82	%	13.6	%	to	13.49	%
Global Securities Fund/VA - Non-Service Shares (OVGS)
2009	0.60	%	to	0.75	%	4,877		1521.54	to	150.41		1,687,533	2.59	%	38.94	%	to	38.73	%
2008	0.60	%	to	0.75	%	7,895		1095.14	to	108.42		1,622,746	1.59	%	-40.55	%	to	-40.64	%
2007	0.60	%	to	0.75	%	9,126		1842.01	to	182.64		3,048,495	1.29	%	5.68	%	to	5.52	%
2006	0.60	%	to	0.75	%	9,975		1743.01	to	173.09		2,878,348	1.01	%	16.99	%	to	16.81	%
2005	0.60	%	to	0.75	%	12,525		1489.88	to	148.17		2,747,732	1.05	%	13.63	%	to	13.46	%

(Continued)

PMLIC VL Separate Account (NOTES TO FINANCIAL STATEMENTS, Continued) December 31, 2009

	Contract Expense Rate**					Units	Unit Fair Value				Contract Owners’ Equity		Investment Income Ration***		Total Return****					Inception Date
High Income Fund/VA - Class 3 (OVHI3)
2009	0.65	%	to	0.75	%	10,062	$	25.4	to	25.34	$	255,133	0.00	%	25.93	%	to	25.8	%
2008	0.65	%	to	0.75	%	8,100		20.17	to	20.14		163,198	6.96	%	-79.03	%	to	-79.05	%
2007	0.65	%	to	0.75	%	2,821		96.19	to	96.13		271,194	0.00	%	-3.81	%	to	-3.87	%	*
High Income Fund/VA - Non-Service Shares (OVHI)
2009	0.60	%	to	0.75	%	2,287		349.94	to	34.65		120,926	0.00	%	24.57	%	to	24.38	%
2008	0.60	%	to	0.75	%	3,768		280.92	to	27.85		130,648	8.28	%	-78.8	%	to	-78.83	%
2007	0.60	%	to	0.75	%	4,957		1325.08	to	131.58		757,773	7.95	%	-0.7	%	to	-0.85	%
2006	0.60	%	to	0.75	%	7,314		1334.46	to	132.71		1,085,691	6.94	%	8.77	%	to	8.61	%
2005	0.60	%	to	0.75	%	5,853		1226.86	to	122.2		794,283	6.19	%	1.7	%	to	1.55	%
Main Street Fund(R)/VA - Non-Service Shares (OVGI)
2009	0.60	%	to	0.75	%	18,999		1092.14	to	107.96		2,320,394	2.14	%	27.52	%	to	27.33	%
2008	0.60	%	to	0.75	%	22,083		856.46	to	84.79		2,101,015	1.61	%	-38.84	%	to	-38.93	%
2007	0.60	%	to	0.75	%	24,468		1400.32	to	138.85		3,829,040	0.95	%	3.8	%	to	3.64	%
2006	0.60	%	to	0.75	%	23,629		1349.11	to	133.97		3,569,662	1.06	%	14.34	%	to	14.17	%
2005	0.60	%	to	0.75	%	19,483		1179.93	to	117.34		2,677,128	1.28	%	5.34	%	to	5.19	%
Main Street Small Cap Fund(R)/VA - Non-Service Shares (OVSC)
2009	0.60	%	to	0.75	%	7,566		1695.08	to	167.82		1,469,138	1.03	%	36.38	%	to	36.17	%
2008	0.60	%	to	0.75	%	10,063		1242.95	to	123.24		1,379,569	0.51	%	-38.2	%	to	-38.29	%
2007	0.60	%	to	0.75	%	11,379		2011.29	to	199.73		2,555,347	0.32	%	-1.8	%	to	-1.95	%
2006	0.60	%	to	0.75	%	10,503		2048.24	to	203.7		2,368,572	0.14	%	14.31	%	to	14.14	%
2005	0.60	%	to	0.75	%	7,147		1791.8	to	178.47		1,488,022	0.00	%	9.26	%	to	9.1	%
Foreign Bond Portfolio (Unhedged) - Administrative Class (PMVFBA)
2009	0.75	%				818		109.1				89,246	0.76	%	9.1	%				*
Low Duration Portfolio - Administrative Class (PMVLDA)
2009	0.75	%				1,256		109.9				138,037	1.56	%	9.9	%				*
Putnam VT Growth and Income Fund - IB Shares (PVGIB)
2009	0.60	%	to	0.75	%	1,290		1209.74	to	119.77		155,719	3.07	%	29.04	%	to	28.84	%
2008	0.60	%	to	0.75	%	2,001		937.52	to	92.96		198,497	2.18	%	-39.06	%	to	-39.16	%
2007	0.60	%	to	0.75	%	2,406		1538.53	to	152.78		404,763	1.47	%	-6.6	%	to	-6.74	%
2006	0.60	%	to	0.75	%	2,837		1647.31	to	163.83		567,734	1.35	%	15.22	%	to	15.05	%
2005	0.60	%	to	0.75	%	2,559		1429.72	to	142.4		365,035	1.23	%	4.6	%	to	4.44	%
Putnam VT International Equity Fund - IB Shares (PVTIGB)
2009	0.60	%	to	0.75	%	383		1549.96	to	153.45		107,636	0.00	%	23.89	%	to	23.7	%
2008	0.60	%	to	0.75	%	524		1251.09	to	124.05		170,221	2.08	%	-44.29	%	to	-44.37	%
2007	0.60	%	to	0.75	%	560		2245.59	to	222.99		289,937	2.71	%	7.72	%	to	7.55	%
2006	0.60	%	to	0.75	%	728		2084.75	to	207.33		229,635	0.58	%	26.96	%	to	26.77	%
2005	0.60	%	to	0.75	%	885		1642.09	to	163.55		309,159	1.44	%	11.53	%	to	11.36	%
Putnam VT Voyager Fund - IB Shares (PVTVB)
2009	0.60	%	to	0.75	%	4,172		1451.67	to	143.72		1,107,276	0.66	%	62.92	%	to	62.67	%
2008	0.60	%	to	0.75	%	3,194		891.06	to	88.35		307,684	0.00	%	-37.41	%	to	-37.5	%
2007	0.60	%	to	0.75	%	3,387		1423.61	to	141.37		494,816	0.00	%	4.89	%	to	4.73	%
2006	0.60	%	to	0.75	%	3,775		1357.3	to	134.99		1,006,933	0.11	%	4.81	%	to	4.65	%
2005	0.60	%	to	0.75	%	3,939		1295.05	to	128.99		981,059	0.66	%	5.06	%	to	4.91	%
Blue Chip Growth Portfolio - II (TRBCG2)
2009	0.65	%	to	0.75	%	10,571		109.78	to	109.26		1,157,031	0.00	%	40.87	%	to	40.73	%
2008	0.65	%	to	0.75	%	13,346		77.93	to	77.64		1,037,913	0.09	%	-43.02	%	to	-43.08	%
2007	0.65	%	to	0.75	%	16,056		136.76	to	136.4		2,193,719	0.10	%	11.76	%	to	11.64	%
2006	0.65	%	to	0.75	%	12,367		122.38	to	122.17		1,512,514	0.28	%	8.62	%	to	8.51	%
2005	0.65	%	to	0.75	%	2,658		112.66	to	112.59		299,227	0.28	%	12.66	%	to	12.59	%	*

(Continued)

PMLIC VL Separate Account (NOTES TO FINANCIAL STATEMENTS, Continued) December 31, 2009

	Contract Expense Rate**					Units	Unit Fair Value				Contract Owners’ Equity		Investment Income Ratio***		Total Return****					Inception Date
Equity Income Portfolio - II (TREI2)
2009	0.65	%	to	0.75	%	18,737	$	100.7	to	100.23	$	1,880,125	1.92	%	24.44	%	to	24.32	%
2008	0.65	%	to	0.75	%	18,840		80.92	to	80.62		1,520,540	2.18	%	-36.68	%	to	-36.74	%
2007	0.65	%	to	0.75	%	19,103		127.79	to	127.45		2,436,788	1.52	%	2.36	%	to	2.26	%
2006	0.65	%	to	0.75	%	15,244		124.85	to	124.64		1,901,205	1.38	%	17.88	%	to	17.76	%
2005	0.65	%	to	0.75	%	8,420		105.91	to	105.84		891,372	1.62	%	5.91	%	to	5.84	%	*
Limited-Term Bond Portfolio - II (TRLT2)
2008	0.65	%	to	0.75	%	10,415		109.66	to	109.25		1,140,127	3.63	%	0.65	%	to	0.55	%
2007	0.65	%	to	0.75	%	3,708		108.95	to	108.66		403,165	4.02	%	4.54	%	to	4.43	%
2006	0.65	%	to	0.75	%	2,565		104.22	to	104.05		266,960	3.68	%	3.35	%	to	3.25	%
2005	0.65	%	to	0.75	%	564		100.84	to	100.77		56,684	2.10	%	0.84	%	to	0.77	%	*
Worldwide Insurance Trust - Worldwide Bond Fund - Class R1 (VWBFR)
2009	0.60	%	to	0.75	%	26,836		1358.56	to	134.71		4,950,164	3.97	%	5.35	%	to	5.19	%
2008	0.60	%	to	0.75	%	28,883		1289.6	to	128.06		4,954,047	7.27	%	3.08	%	to	2.93	%
2007	0.60	%	to	0.75	%	26,479		1251.06	to	124.42		4,015,337	5.76	%	9.16	%	to	8.99	%
2006	0.60	%	to	0.75	%	23,711		1146.09	to	114.15		3,333,139	7.46	%	5.76	%	to	5.6	%
2005	0.60	%	to	0.75	%	20,782		1083.66	to	108.1		2,771,982	5.62	%	-3.69	%	to	-3.83	%
Worldwide Insurance Trust - Worldwide Bond Fund - Initial Class (VWBF)
2009	0.60	%	to	0.75	%	8,890		2246.92	to	219.47		3,920,034	3.91	%	5.35	%	to	5.19	%
2008	0.60	%	to	0.75	%	10,846		2132.87	to	208.65		4,376,847	8.56	%	2.99	%	to	2.83	%
2007	0.60	%	to	0.75	%	13,677		2070.99	to	202.9		4,795,909	6.13	%	9.05	%	to	8.89	%
2006	0.60	%	to	0.75	%	15,761		1899.1	to	186.34		4,697,166	8.83	%	5.85	%	to	5.69	%
2005	0.60	%	to	0.75	%	19,420		1794.23	to	176.31		5,372,232	7.44	%	-3.61	%	to	-3.75	%
Worldwide Insurance Trust - Worldwide Emerging Markets Fund - Class R1 (VWEMR)
2009	0.60	%	to	0.75	%	46,050		2342.41	to	232.26		13,909,214	0.17	%	112.12	%	to	111.8	%
2008	0.60	%	to	0.75	%	53,636		1104.29	to	109.66		7,283,105	0.00	%	-64.96	%	to	-65.01	%
2007	0.60	%	to	0.75	%	49,551		3151.67	to	313.44		19,841,880	0.40	%	36.74	%	to	36.53	%
2006	0.60	%	to	0.75	%	50,796		2304.88	to	229.57		14,924,859	0.55	%	38.7	%	to	38.49	%
2005	0.60	%	to	0.75	%	48,585		1661.75	to	165.76		10,258,252	0.66	%	31.08	%	to	30.88	%
Worldwide Insurance Trust - Worldwide Emerging Markets Fund - Initial Class (VWEM)
2009	0.60	%	to	0.75	%	36,924		2520.65	to	246.95		17,037,479	0.18	%	111.9	%	to	111.58	%
2008	0.60	%	to	0.75	%	46,592		1189.54	to	116.71		9,570,941	0.00	%	-64.99	%	to	-65.04	%
2007	0.60	%	to	0.75	%	56,497		3397.77	to	333.88		31,998,127	0.43	%	36.79	%	to	36.58	%
2006	0.60	%	to	0.75	%	65,596		2483.98	to	244.46		27,532,833	0.60	%	38.66	%	to	38.45	%
2005	0.60	%	to	0.75	%	78,073		1791.42	to	176.56		22,869,649	0.82	%	31.21	%	to	31.01	%
Worldwide Insurance Trust - Worldwide Hard Assets Fund - Class R1 (VWHAR)
2009	0.60	%	to	0.75	%	27,655		2835.84	to	281.19		10,313,435	0.25	%	56.68	%	to	56.44	%
2008	0.60	%	to	0.75	%	26,325		1809.99	to	179.74		6,301,428	0.34	%	-46.42	%	to	-46.5	%
2007	0.60	%	to	0.75	%	24,100		3378.1	to	335.96		11,151,910	0.11	%	44.45	%	to	44.24	%
2006	0.60	%	to	0.75	%	23,664		2338.52	to	232.92		7,147,905	0.06	%	23.79	%	to	23.61	%
2005	0.60	%	to	0.75	%	19,315		1889.04	to	188.44		4,724,798	0.22	%	50.71	%	to	50.49	%
Worldwide Insurance Trust - Worldwide Hard Assets Fund - Initial Class (VWHA)
2009	0.60	%	to	0.75	%	8,720		4052.89	to	395.88		6,557,816	0.27	%	56.59	%	to	56.36	%
2008	0.60	%	to	0.75	%	9,861		2588.17	to	253.19		4,997,263	0.30	%	-46.45	%	to	-46.53	%
2007	0.60	%	to	0.75	%	11,498		4832.97	to	473.49		9,777,657	0.13	%	44.48	%	to	44.27	%
2006	0.60	%	to	0.75	%	13,836		3345.02	to	328.21		8,254,908	0.06	%	23.75	%	to	23.56	%
2005	0.60	%	to	0.75	%	16,311		2703.06	to	265.62		7,706,734	0.32	%	50.77	%	to	50.54	%

(Continued)

PMLIC VL Separate Account (NOTES TO FINANCIAL STATEMENTS, Continued) December 31, 2009

	Contract Expense Rate**					Units	Unit Fair Value				Contract Owners’ Equity		Investment Income Ratio***		Total Return****					Inception Date
Worldwide Insurance Trust - Worldwide Real Estate Fund - Class R1 (VWRER)
2008	0.60	%	to	0.75	%	24,291	$	904.64	to	89.83	$	2,867,887	5.55	%	-55.37	%	to	-55.44	%
2007	0.60	%	to	0.75	%	24,320		2027.19	to	201.61		6,617,437	0.95	%	0.35	%	to	0.19	%
2006	0.60	%	to	0.75	%	22,052		2020.21	to	201.22		5,506,576	1.42	%	30.03	%	to	29.83	%
2005	0.60	%	to	0.75	%	21,899		1553.66	to	154.98		4,031,485	1.53	%	20.29	%	to	20.11	%
Vanguard(R) Variable Insurance Funds - Equity Income Portfolio (VVEI)
2009				0.95	%	11,643		134.52				1,566,225	6.47	%	15.67	%
2008				0.95	%	12,814		116.30				1,490,261	3.62	%	-31.57	%
2007				0.95	%	12,966		169.95				2,203,522	2.32	%	3.54	%
2006				0.95	%	11,748		164.14				1,928,212	2.52	%	19.56	%
2005				0.95	%	8,568		137.29				1,176,354	1.99	%	3.16	%
Vanguard(R) Variable Insurance Funds - High Yield Bond Portfolio (VVHYB)
2009				0.95	%	7,329		143.63				1,052,698	10.32	%	37.54	%
2008				0.95	%	6,995		104.43				730,479	7.84	%	-22.69	%
2007				0.95	%	6,190		135.08				836,154	6.36	%	0.98	%
2006				0.95	%	4,963		133.76				663,844	6.78	%	7.25	%
2005				0.95	%	4,203		124.72				524,177	7.28	%	1.78	%
Vanguard(R) Variable Insurance Funds - Mid-Cap Index Portfolio (VVMCI)
2009				0.95	%	16,890		164.39				2,776,530	2.28	%	39.05	%
2008				0.95	%	17,877		118.23				2,113,587	1.59	%	-42.37	%
2007				0.95	%	15,734		205.14				3,227,558	1.17	%	5.13	%
2006				0.95	%	12,722		195.12				2,482,308	0.91	%	12.68	%
2005				0.95	%	7,819		173.17				1,353,960	0.78	%	12.9	%
Vanguard(R) Variable Insurance Funds - Total Bond Market Index Portfolio (VVHGB)
2009				0.95	%	9,346		130.23				1,217,146	5.74	%	4.94	%
2008				0.95	%	9,239		124.10				1,146,560	4.16	%	4.23	%
2007				0.95	%	10,397		119.06				1,237,874	3.74	%	5.97	%
2006				0.95	%	9,537		112.35				1,071,517	3.61	%	3.32	%
2005				0.95	%	6,477		108.74				704,467	3.25	%	1.44	%
Ivy Fund Variable Insurance Portfolios, Inc. - Asset Strategy (WRASP)
2009				0.75	%	1,332		119.06				158,586	0.00	%	19.06	%				*
Advantage Funds Variable Trust - VT Discovery Fund (SVDF)
2009	0.60	%	to	0.75	%	3,356		658.74	to	64.92		658,495	0.00	%	39.46	%	to	39.26	%
2008	0.60	%	to	0.75	%	124,354		472.33	to	46.62		6,135,522	0.00	%	-44.69	%	to	-44.77	%
2007	0.60	%	to	0.75	%	133,855		853.97	to	84.42		11,868,973	0.00	%	21.59	%	to	21.41	%
2006	0.60	%	to	0.75	%	142,861		702.35	to	69.54		10,355,423	0.00	%	13.96	%	to	13.79	%
2005	0.60	%	to	0.75	%	151,219		616.31	to	61.11		9,712,121	0.00	%	15.35	%	to	15.23	%	*
Advantage Funds Variable Trust - VT Opportunity Fund (SVOF)
2009	0.60	%	to	0.75	%	1,478		1228.04	to	121.03		542,984	0.00	%	46.85	%	to	46.63	%
2008	0.60	%	to	0.75	%	51,776		836.24	to	82.54		4,552,777	1.91	%	-40.46	%	to	-40.55	%
2007	0.60	%	to	0.75	%	58,374		1404.42	to	138.83		8,644,715	0.60	%	5.99	%	to	5.83	%
2006	0.60	%	to	0.75	%	60,023		1325.02	to	131.18		8,442,541	0.00	%	11.55	%	to	11.38	%
2005	0.60	%	to	0.75	%	64,603		1187.83	to	117.78		8,255,270	0.00	%	7.24	%	to	7.08	%	*
Advantage Funds Variable Trust - VT Small Cap Growth Fund (WFVSCG)
2009				0.75	%	333		131.36				43,742	0.00	%	31.36	%				*
J.P. Morgan NVIT Balanced Fund - Class IV (obsolete) (BF4)
2008	0.35	%	to	0.75	%	48,504		3524.27	to	227.22		26,513,389	2.74	%	-25.82	%	to	-26.11	%
2007	0.35	%	to	0.75	%	54,224		4750.87	to	307.54		39,307,336	2.20	%	4.28	%	to	3.86	%
2006	0.35	%	to	0.75	%	57,587		4555.8	to	296.1		39,020,861	2.36	%	11.91	%	to	11.46	%
2005	0.35	%	to	0.75	%	64,125		4070.96	to	265.64		37,680,892	2.08	%	2.26	%	to	1.86	%
Merrill Lynch 2006 Stripped Zero Coupon Bond (obsolete) (MLSZB)
2005	0.60	%	to	1.00	%	25,062		4629.79	to	292.43		11,819,715	1.54	%	1.99	%	to	1.58	%

(Continued)

PMLIC VL Separate Account (NOTES TO FINANCIAL STATEMENTS, Continued) December 31, 2009

	Contract Expense Rate**					Units	Unit Fair Value				Contract Owners’ Equity		Investment Income Ratio***		Total Return****					Inception Date
NVIT Mid Cap Growth Fund - Class IV (obsolete) (SGRF4)
2008	0.60	%	to	0.75	%	83,922	$	4197.82	to	278.05	$	36,215,004		0.00%	-46.43	%	to	-46.51	%
2007	0.60	%	to	0.75	%	90,685		7835.48	to	519.78		72,826,749		0.00%	8.38	%	to	8.22	%
2006	0.60	%	to	0.75	%	97,321		7229.62	to	480.32		71,620,470		0.00%	9.28	%	to	9.11	%
2005	0.60	%	to	0.75	%	107,547		6615.81	to	440.2		72,034,687		0.00%	9.16	%	to	9	%
Worldwide Insurance Trust - Worldwide Real Estate Fund - Initial Class (obsolete) (VWRE)
2008	0.60	%	to	0.75	%	9,119		1240	to	122.03		1,682,574		5.75%	-55.39	%	to	-55.45	%
2007	0.60	%	to	0.75	%	11,517		2779.38	to	273.94		4,616,515		1.07%	0.28	%	to	0.13	%
2006	0.60	%	to	0.75	%	13,258		2771.53	to	273.58		5,209,377		1.55%	30.14	%	to	29.94	%
2005	0.60	%	to	0.75	%	15,785		2129.71	to	210.54		4,701,955		2.21%	20.29	%	to	20.11	%
2009	Attributable to Nationwide Life Insurance Company:													401,816
2009	Total Contract Owners’ Equity:												$	1,249,883,066
2008	Attributable to Nationwide Life Insurance Company:													298,851
2008	Total Contract Owners’ Equity:												$	1,091,757,848
2007	Attributable to Nationwide Life Insurance Company:													590,772
2007	Total Contract Owners’ Equity:												$	1,907,552,148
2006	Attributable to Nationwide Life Insurance Company:													346,218
2006	Total Contract Owners’ Equity:												$	1,829,336,841
2005	Attributable to Nationwide Life Insurance Company:													224,348
2005	Total Contract Owners’ Equity:												$	1,691,906,540

* Denotes the minimum and/or maximum of the total return ranges, for underlying mutual fund options that were added and funded during the reporting period. One or both of the returns presented may not be annualized. Minimum and maximum ranges are not shown for underlying mutual fund options for which a single contract expense rate (product option) exists. In such case, the total return presented is representative of all units issued and outstanding at period end.

** This represents the range of annual contract expense rates of the variable account for the period indicated and includes only those expenses that are charged through a reduction in the unit values. Excluded are expenses of the underlying mutual funds and charges made directly to contract owner accounts through the redemption of units.

*** This represents the dividends for the period indicated, excluding distributions of capital gains, received by the subaccount from the underlying mutual fund, net of management fees assessed by the fund manager, divided by average net assets. The ratios exclude those expenses, such as mortality and expense charges, that result in direct reductions to the contractholder accounts through reductions in unit values. The recognition of investment income by the subaccount is affected by the timing of the declaration of dividends by the underlying fund in which the subaccounts invest.

**** This represents the range of minimum and maximum total returns for the period indicated, including changes in the value of the underlying mutual fund, which reflects the reduction of unit value for expenses assessed. Total return is not annualized if the underlying mutual fund option is initially offered, funded, or both, during the period presented.

Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholder

Nationwide Life Insurance Company:

We have audited the accompanying consolidated balance sheets of Nationwide Life Insurance Company and subsidiaries (the Company) as of December 31, 2009 and 2008, and the related consolidated statements of income (loss), changes in equity and cash flows for each of the years in the three-year period ended December 31, 2009. In connection with our audits of the consolidated financial statements, we also have audited the financial statement schedules as listed in the accompanying index. These consolidated financial statements and financial statement schedules are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedules based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Nationwide Life Insurance Company and subsidiaries as of December 31, 2009 and 2008, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2009, in conformity with U.S. generally accepted accounting principles. Also in our opinion, the related financial statement schedules, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein.

As discussed in Note 2 to the consolidated financial statements, the Company changed its method of evaluating other-than-temporary impairments of debt securities due to the adoption of new accounting requirements issued by the FASB, as of January 1, 2009.

/s/ KPMG LLP

Columbus, Ohio

March 1, 2010

NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES

(a wholly-owned subsidiary of Nationwide Financial Services, Inc.)

Consolidated Statements of Income (Loss)

(in millions)

	Years ended December 31,
	2009			2008			2007
Revenues:
Policy charges	$	1,245.1		$	1,340.5		$	1,383.9
Premiums		469.7			394.1			407.0
Net investment income		1,879.1			1,864.7			2,192.2
Net realized investment gains (losses)		453.8			(347.8	)		(47.2	)
Other-than-temporary impairment losses (consisting of $992.1 of total other-than-temporary impairment losses, net of $417.5 recognized in other comprehensive income, for the year ended December 31, 2009)		(574.6	)		(1,130.7	)		(117.7	)
Other income		(3.9	)		(4.2	)		8.9
Total revenues		3,469.2			2,116.6			3,827.1
Benefits and expenses:
Interest credited to policyholder accounts		1,100.1			1,172.6			1,311.0
Benefits and claims		812.1			856.1			672.5
Policyholder dividends		87.0			93.1			83.1
Amortization of deferred policy acquisition costs		465.6			691.6			382.1
Amortization of value of business acquired and other intangible assets		62.8			30.9			48.5
Interest expense, primarily with Nationwide Financial Services, Inc. (NFS)		55.3			61.8			70.0
Other operating expenses		579.8			631.6			630.8
Total benefits and expenses		3,162.7			3,537.7			3,198.0
Income (loss) from continuing operations before federal income tax expense (benefit)		306.5			(1,421.1	)		629.1
Federal income tax expense (benefit)		47.9			(533.8	)		147.3
Income (loss) from continuing operations		258.6			(887.3	)		481.8
Cumulative effect of adoption of accounting principle, net of taxes		—			—			(6.0	)
Net income (loss)		258.6			(887.3	)		475.8
Less: Net loss attributable to noncontrolling interest		52.3			72.3			50.9
Net income (loss) attributable to NLIC	$	310.9		$	(815.0	)	$	526.7

See accompanying notes to consolidated financial statements.

NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES

(a wholly-owned subsidiary of Nationwide Financial Services, Inc.)

Consolidated Balance Sheets

(in millions, except for share and per share amounts)

	December 31,
	2009			2008
Assets
Investments:
Securities available-for-sale, at fair value:
Fixed maturity securities (amortized cost $25,103.1 and $24,122.6)	$	24,749.7		$	21,387.5
Equity securities (amortized cost $48.8 and $62.2)		52.6			54.1
Mortgage loans on real estate, net		6,829.0			7,770.1
Short-term investments, including amounts managed by a related party		1,003.4			2,913.0
Other investments		1,516.8			1,733.2
Total investments		34,151.5			33,857.9
Cash and cash equivalents		49.1			42.0
Accrued investment income		401.9			342.9
Deferred policy acquisition costs		3,983.1			4,523.8
Value of business acquired		276.9			334.0
Goodwill		199.8			199.8
Other assets		2,085.2			3,662.2
Separate account assets		57,846.2			48,841.0
Total assets	$	98,993.7		$	91,803.6
Liabilities and Shareholder’s Equity
Liabilities:
Future policy benefits and claims	$	33,149.4		$	35,714.5
Short-term debt		150.0			249.7
Long-term debt, payable to NFS		700.0			700.0
Other liabilities		1,826.4			2,589.6
Separate account liabilities		57,846.2			48,841.0
Total liabilities		93,672.0			88,094.8
Shareholder’s equity:
Common stock ($1 par value; authorized - 5,000,000 shares; issued and outstanding - 3,814,779 shares)		3.8			3.8
Additional paid-in capital		1,717.7			1,697.7
Retained earnings		3,515.2			2,952.6
Accumulated other comprehensive loss		(265.6	)		(1,361.3	)
Total shareholder’s equity		4,971.1			3,292.8
Noncontrolling interest		350.6			416.0
Total equity		5,321.7			3,708.8
Total liabilities and equity	$	98,993.7		$	91,803.6

See accompanying notes to consolidated financial statements.

NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES

(a wholly-owned subsidiary of Nationwide Financial Services, Inc.)

Condensed Consolidated Statements of Changes in Equity

(in millions)

	Common stock		Additional paid-in capital		Retained earnings			Accumulated other comprehensive income (loss)			Total shareholder’s equity			Non- controlling interest			Total equity
Balance as of December 31, 2006	$	3.8	$	1,358.8	$	4,311.3		$	24.6		$	5,698.5		$	445.5		$	6,144.0
Dividends to NFS		—		—		(612.5	)		—			(612.5	)		—			(612.5	)
Member contributions to noncontrolling interest		—		—		—			—			—			70.7			70.7
Other, net		—		—		2.6			—			2.6			0.4			3.0
Comprehensive income (loss):
Net income (loss)		—		—		526.7			—			526.7			(50.9	)		475.8
Other comprehensive loss, net of taxes		—		—		—			(111.7	)		(111.7	)		—			(111.7	)
Total comprehensive income (loss)												415.0			(50.9	)		364.1
Balance as of December 31, 2007	$	3.8	$	1,358.8	$	4,228.1		$	(87.1	)	$	5,503.6		$	465.7		$	5,969.3
Dividends to NFS		—		—		(460.5	)		—			(460.5	)		—			(460.5	)
Capital contributed by NFS		—		338.9		—			—			338.9			—			338.9
Member contributions to noncontrolling interest		—		—		—			—			—			23.0			23.0
Other, net		—		—		—			—			—			(0.4	)		(0.4	)
Comprehensive loss:
Net loss		—		—		(815.0	)		—			(815.0	)		(72.3	)		(887.3	)
Other comprehensive loss, net of taxes		—		—		—			(1,274.2	)		(1,274.2	)		—			(1,274.2	)
Total comprehensive loss												(2,089.2	)		(72.3	)		(2,161.5	)
Balance as of December 31, 2008	$	3.8	$	1,697.7	$	2,952.6		$	(1,361.3	)	$	3,292.8		$	416.0		$	3,708.8
Cumulative effect of change in accounting principle, net of taxes		—		—		249.7			(249.7	)		—			—			—
Capital contributed by NFS		—		20.0		—			—			20.0			—			20.0
Other, net		—		—		2.0			—			2.0			(13.1	)		(11.1	)
Comprehensive income (loss):
Net income (loss)		—		—		310.9			—			310.9			(52.3	)		258.6
Other comprehensive income, net of taxes		—		—		—			1,345.4			1,345.4			—			1,345.4
Total comprehensive income (loss)												1,656.3			(52.3	)		1,604.0
Balance as of December 31, 2009	$	3.8	$	1,717.7	$	3,515.2		$	(265.6	)	$	4,971.1		$	350.6		$	5,321.7

See accompanying notes to consolidated financial statements.

NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES

(a wholly-owned subsidiary of Nationwide Financial Services, Inc.)

Consolidated Statements of Cash Flows

(in millions)

	Years ended December 31,
	2009			2008			2007
Cash flows from operating activities:
Net income (loss)	$	258.6		$	(887.3	)	$	475.8
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Net realized investment (gains) losses		(453.8	)		347.8			47.2
Other-than-temporary impairment losses		574.6			1,130.7			117.7
Interest credited to policyholder accounts		1,100.1			1,172.6			1,311.0
Capitalization of deferred policy acquisition costs		(513.0	)		(587.6	)		(631.3	)
Amortization of deferred policy acquisition costs		465.6			691.6			382.1
Amortization and depreciation		51.1			48.1			81.7
Decrease (increase) in other assets		291.6			(727.2	)		552.7
(Decrease) increase in policy and other liabilities		(1,859.9	)		583.0			(50.6	)
Decrease (increase) in derivative assets		582.3			(1,030.7	)		(146.9	)
Increase in derivative liabilities		57.0			153.9			96.4
Other, net		57.4			51.0			10.0
Net cash provided by operating activities		611.6			945.9			2,245.8
Cash flows from investing activities:
Proceeds from maturity of securities available-for-sale		3,889.2			4,271.5			4,582.7
Proceeds from sale of securities available-for-sale		4,210.5			4,308.8			4,977.9
Proceeds from repayments or sales of mortgage loans on real estate		773.1			869.1			2,653.7
Cost of securities available-for-sale acquired		(9,205.7	)		(7,255.5	)		(8,400.2	)
Cost of mortgage loans on real estate originated or acquired		(35.7	)		(371.8	)		(1,944.0	)
Net decrease (increase) in short-term investments		1,909.6			(1,856.8	)		831.5
Collateral (paid) received, net		(868.6	)		592.2			(207.3	)
Other, net		207.7			15.3			(156.2	)
Net cash provided by investing activities		880.1			572.8			2,338.1
Cash flows from financing activities:
Net (decrease) increase in short-term debt		(99.7	)		(35.6	)		210.1
Capital contributed by NFS		20.0			—			—
Cash dividends paid to NFS		—			(280.7	)		(612.5	)
Investment and universal life insurance product deposits and other additions		3,877.1			3,862.3			3,913.8
Investment and universal life insurance product withdrawals and other deductions		(5,301.4	)		(5,305.9	)		(8,101.8	)
Other, net		19.4			281.9			0.3
Net cash used in financing activities		(1,484.6	)		(1,478.0	)		(4,590.1	)
Net increase (decrease) in cash and cash equivalents		7.1			40.7			(6.2	)
Cash and cash equivalents, beginning of period		42.0			1.3			7.5
Cash and cash equivalents, end of period	$	49.1		$	42.0		$	1.3

See accompanying notes to consolidated financial statements.

NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES

(a wholly-owned subsidiary of Nationwide Financial Services, Inc.)

Notes to Consolidated Financial Statements

December 31, 2009, 2008 and 2007

(1) Nature of Operations  

Nationwide Life Insurance Company (NLIC, or collectively with its subsidiaries, the Company) was incorporated in 1929 and is an Ohio stock legal reserve life insurance company. The Company is a member of the Nationwide group of companies (Nationwide), which is comprised of Nationwide Mutual Insurance Company (NMIC) and all of its subsidiaries and affiliates.

All of the outstanding shares of NLIC’s common stock are owned by NFS, a holding company formed by Nationwide Corporation (Nationwide Corp.), a majority-owned subsidiary of NMIC.

On August 6, 2008, NFS entered into a definitive agreement for NMIC, and Nationwide Corporation (Nationwide Corp.)., to acquire all of the outstanding publicly held Class A common shares of NFS for $52.25 per share in cash. The transaction closed on January 1, 2009 and NFS became a privately held subsidiary of Nationwide Corp.

Wholly-owned subsidiaries of NLIC as of December 31, 2009 include Nationwide Life and Annuity Insurance Company (NLAIC) and Nationwide Investment Services Corporation (NISC). NLAIC offers universal life insurance, variable universal life insurance, corporate-owned life insurance (COLI) and individual annuity contracts on a non-participating basis. NISC is a registered broker-dealer.

The Company is a leading provider of long-term savings and retirement products in the United States of America (U.S.). The Company develops and sells a diverse range of products including individual annuities, private and public sector group retirement plans, other investment products sold to institutions, life insurance and advisory services.

The Company sells its products through a diverse distribution network. Unaffiliated entities that sell the Company’s products to their own customer bases include independent broker-dealers, financial institutions, wirehouse and regional firms, pension plan administrators, and life insurance specialists. Representatives of affiliates who market products directly to a customer base include Nationwide Retirement Solutions, Inc. (NRS), and Nationwide Financial Network (NFN) producers. The Company also distributes products through the agency distribution force of its ultimate parent company, NMIC.

As of December 31, 2009 and 2008, the Company did not have a significant concentration of financial instruments in a single investee, industry or geographic region of the U.S. Also, the Company did not have a concentration of business transactions with a particular customer, lender, distribution source, market or geographic region of the U.S. in which business is conducted that makes it overly vulnerable to a single event which could cause a severe impact to the Company’s financial position.

On December 31, 2009, NLIC merged with its affiliate, Nationwide Life Insurance Company of America and subsidiaries (NLICA), with NLIC as the surviving entity. In addition, NLIC’s subsidiary, Nationwide Life and Annuity Insurance Company (NLAIC), merged with a subsidiary of NLICA, Nationwide Life and Annuity Company of America (NLACA), effective as of December 31, 2009, with NLAIC as the surviving entity. The mergers were completed to streamline the enterprise’s capital structure and create operational efficiencies. See Note 2 (p) for further information.

(2) Summary of Significant Accounting Policies  

The Company’s significant accounting policies that materially affect financial reporting are summarized below. The accompanying consolidated financial statements were prepared in accordance with United States generally accepted accounting principles (GAAP).

The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements. Actual results could differ significantly from those estimates.

NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES

(a wholly-owned subsidiary of Nationwide Financial Services, Inc.)

Notes to Consolidated Financial Statements, Continued

December 31, 2009, 2008 and 2007

The Company’s most critical estimates include those used to determine the following: the balance, recoverability and amortization of deferred policy acquisition costs (DAC); whether an available-for-sale security is other-than-temporarily impaired, valuation allowances for mortgage loans on real estate; valuation of derivatives; the liability for future policy benefits and claims, including the valuation of embedded derivatives resulting from living benefit contracts; and the federal income tax provision. Although some variability is inherent in these estimates, recorded amounts reflect management’s best estimates based on facts and circumstances as of the balance sheet date. Management believes the amounts provided are appropriate.

Certain items in the 2008 and 2007 consolidated financial statements and related notes have been reclassified to conform to the current presentation.

(a) Consolidation Policy

The consolidated financial statements include the accounts of NLIC and companies in which NLIC directly or indirectly has a controlling financial interest. All significant intercompany balances and transactions were eliminated in consolidation.

(b) Subsequent events

The Company evaluated subsequent events through the date the consolidated financial statements were filed with the SEC.

(c) Valuation of Investments, Investment Income, Related Gains and Losses and Other-Than-Temporary Impairment Evaluations

The Company is required to classify its fixed maturity securities and marketable equity securities as held-to-maturity, available-for-sale or trading. All fixed maturity and marketable equity securities are classified as available-for-sale. Available-for-sale securities are stated at fair value, with unrealized gains and losses, net of adjustments to DAC, value of business acquired (VOBA), future policy benefits and claims, policyholder dividend obligation and deferred federal income taxes reported as a separate component of accumulated other comprehensive income (loss) (AOCI) in shareholder’s equity. The adjustment to DAC and VOBA represents the changes in amortization of DAC and VOBA that would have been required as a charge or credit to operations had such unrealized amounts been realized and allocated to the product lines. The adjustment to future policy benefits and claims represents the increase in policy reserves from using a discount rate that would have been required had such unrealized amounts been realized and the proceeds reinvested at then current market interest rates, which were lower than the then current effective portfolio rate. Net realized gains and losses on the sale of investments are determined using the specific identification method.

For fixed maturity and marketable equity securities for which market quotations are available, the Company generally uses independent pricing services to assist in determining the fair value measurement. For certain fixed maturity securities not priced by independent services (generally investment grade private placement securities without quoted market prices), an internally developed pricing model or “corporate pricing matrix” is most often used. The corporate pricing matrix is developed by obtaining private spreads versus the U.S. Treasury yield for corporate securities with varying weighted average lives and bond ratings. The weighted average life and bond rating of a particular fixed maturity security to be priced using the corporate matrix are important inputs into the model and are used to determine a corresponding spread that is added to the U.S. Treasury yield to create an estimated market yield for that bond. The estimated market yield and other relevant factors are then used to estimate the fair value of the particular fixed maturity security. See Note 4 for further information regarding these alternative pricing processes.

For mortgage-backed securities, the Company recognizes income using a constant effective yield method based on prepayment assumptions and the estimated economic life of the securities. When estimated prepayments differ significantly from anticipated prepayments, the effective yield is recalculated to reflect actual payments to date and anticipated future payments. Any resulting adjustment is included in net investment income. All other investment income is recorded using the interest method without anticipating the impact of prepayments.

NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES

(a wholly-owned subsidiary of Nationwide Financial Services, Inc.)

Notes to Consolidated Financial Statements, Continued

December 31, 2009, 2008 and 2007

Management regularly reviews each investment in its fixed maturity and equity securities portfolios to evaluate the necessity of recording impairment losses for other-than-temporary declines in the fair value of investments.

As a result of the Company’s adoption of guidance impacting Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 320-10, Investments – Debt and Equity Securities, in the first quarter of 2009, for all debt securities evaluated for other-than-temporary impairment (for which the Company does not have the intent to sell and it is not more likely than not that it will be required to sell the security before the recovery of its amortized cost basis), the Company considers the timing and amount of the cash flows. The Company evaluates its intent to sell on an individual security basis.

Additionally, debt securities that become other-than-temporarily impaired (where the Company does not intend to sell the security and it is not more likely than not that it will be required to sell the security prior to recovery of the security’s amortized cost) are bifurcated with the credit portion of the impairment loss being recognized in earnings and the non-credit loss portion of the impairment being recognized in a separate component of other comprehensive income, net of applicable taxes and other offsets.

The Company’s practice is to disclose as part of the separate component of accumulated other comprehensive income both the non-credit portion of the other-than-temporary impairment recognized in other comprehensive income and any subsequent changes in the fair value of those debt securities.

Prior to 2009, an other-than-temporary impairment charge was taken when the Company did not have the ability and intent to hold the security until the forecasted recovery or if it was probable that the Company would not recover all contractual amounts when due. Many criteria were considered during this process including, but not limited to, specific credit issues and financial prospects related to the issuer, the quality of the underlying collateral, management’s intent and ability to hold the security until recovery, current economic conditions that could affect the creditworthiness of the issuer in the future, the current fair value as compared to the amortized cost of the security, the extent and duration of the unrealized loss, and the rating of the affected security. Other-than-temporary impairment losses result in a permanent reduction to the cost basis of the underlying investment equal to the difference between the estimated fair value of the security and its amortized cost.

The Company provides valuation allowances for impairments of mortgage loans on real estate based on a review by portfolio managers. Mortgage loans on real estate are considered impaired when, based on current information and events, it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement. When management determines that a loan is impaired, a provision for loss is established equal to either the difference between the carrying value and the present value of expected future cash flows discounted at the loan’s effective interest rate or the fair value of the collateral if the loan is collateral dependent.

In addition to the valuation allowance on loan-specific reserves, the Company maintains an allowance not yet specifically identified by loan for probable losses inherent in the loan portfolio as of the balance sheet date. The valuation allowance for mortgage loans on real estate reflects management’s best estimate of probable credit losses, including losses incurred at the balance sheet date but not yet identified by specific loan. Management’s periodic evaluation of the adequacy of the allowance for losses is based on past loan loss experience, known and inherent risks in the portfolio, adverse situations that may affect the borrower’s ability to repay, the estimated value of the underlying collateral, composition of the loan portfolio, current economic conditions and other relevant factors.

Changes in the valuation allowance are recorded in net realized investment gains and losses, while loan-specific reserves are included in other-than-temporary impairment losses. Loans in default or in the process of foreclosure are placed on non-accrual status. Interest received on non-accrual status mortgage loans on real estate is included in net investment income in the period received. Interest income on mortgage loans is recognized over the life of the loan using the effective-yield method.

Real estate to be held and used is carried at cost less accumulated depreciation. Real estate designated as held for disposal is not depreciated and is carried at the lower of the carrying value at the time of such designation or fair value less cost to sell. Other long-term investments are carried on the equity method of accounting.

NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES

(a wholly-owned subsidiary of Nationwide Financial Services, Inc.)

Notes to Consolidated Financial Statements, Continued

December 31, 2009, 2008 and 2007

Impairment losses are recorded on investments in long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets’ carrying amounts.

Impairment losses for other-than-temporary declines in the fair values of applicable investments are included in other-than-temporary impairment losses in the consolidated statements of income (loss).

(d) Derivative Instruments

The Company uses derivative instruments in efforts to manage exposures and mitigate risks associated with interest rates, equities, foreign currency and credit. These derivative instruments primarily include interest rate swaps, futures contracts, credit default swaps, cross-currency swaps and other traditional swap agreements. Certain features embedded in the Company’s investment portfolio, equity-indexed life and annuity contracts and certain variable life and annuity contracts are derivatives requiring separate accounting under the provisions of FASB ASC 815-15 Embedded Derivatives. All derivative instruments are carried at fair value and are reflected as an asset or liability. See Note 5 for a discussion on the Company’s use of derivative instruments.

(e) Revenues and Benefits

Investment and Universal Life Insurance Products: Investment products consist primarily of individual and group variable and fixed deferred annuities. Universal life insurance products include universal life insurance, variable universal life insurance, corporate-owned life insurance (COLI), bank-owned life insurance (BOLI) and other interest-sensitive life insurance policies. Revenues for investment products and universal life insurance products consist of net investment income, asset fees, cost of insurance charges, administrative fees and surrender charges that have been earned and assessed against policy account balances during the period. The timing of revenue recognition as it relates to fees assessed on investment contracts and universal life contracts is determined based on the nature of such fees. Asset fees, cost of insurance charges and administrative fees are assessed on a daily or monthly basis and recognized as revenue when assessed and earned. Certain amounts assessed that represent compensation for services to be provided in future periods are reported as unearned revenue and recognized in income over the periods benefited. Surrender charges are recognized upon surrender of a contract in accordance with contractual terms. Policy benefits and claims that are charged to expense include interest credited to policyholder accounts and benefits and claims incurred in the period in excess of related policyholder accounts.

Traditional Life Insurance Products: Traditional life insurance products include those products with fixed and guaranteed premiums and benefits, and primarily consist of whole life insurance, limited-payment life insurance, term life insurance and certain annuities with life contingencies. Premiums for traditional life insurance products are recognized as revenue when due. Benefits and expenses are associated with earned premiums so that profits are recognized over the life of the contract. This association is accomplished through the provision for future policy benefits and the deferral and amortization of policy acquisition costs.

(f) Cash and Cash Equivalents

Cash and cash equivalents consist of short-term highly liquid investments with original maturities of less than three months at the time of purchase. The Company carries cash and cash equivalents at cost, which approximates fair value.

NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES

(a wholly-owned subsidiary of Nationwide Financial Services, Inc.)

Notes to Consolidated Financial Statements, Continued

December 31, 2009, 2008 and 2007

(g) Deferred Policy Acquisition Costs

Investment and universal life insurance products. The Company has deferred certain costs of acquiring investment and universal life insurance products business, principally commissions, certain expenses of the policy issue and underwriting department, and certain variable sales expenses that relate to and vary with the production of new and renewal business. In addition, the Company defers sales inducements, such as interest credit bonuses and jumbo deposit bonuses. Investment products primarily consist of individual and group variable and fixed deferred annuities in the Individual Investments and Retirement Plans segments. Universal life insurance products include universal life insurance, variable universal life insurance, COLI, BOLI and other interest-sensitive life insurance policies in the Individual Protection segment. DAC is subject to recoverability testing in the year of policy issuance and loss recognition testing at the end of each reporting period.

For investment and universal life insurance products, the Company amortizes DAC with interest over the lives of the policies in relation to the present value of estimated gross profits from projected interest margins, asset fees, cost of insurance charges, administrative fees, surrender charges, and net realized investment gains and losses less policy benefits and policy maintenance expenses. The Company adjusts the DAC asset related to investment and universal life insurance products to reflect the impact of unrealized gains and losses on fixed maturity securities available-for-sale, as described in Note 2(c).

The assumptions used in the estimation of future gross profits are based on the Company’s current best estimates of future events and are reviewed as part of an annual process during the second quarter. During the annual process, the Company performs a comprehensive study of assumptions, including mortality and persistency studies, maintenance expense studies, and an evaluation of projected general and separate account investment returns. The most significant assumptions that are involved in the estimation of future gross profits include future net separate account investment performance, surrender/lapse rates, interest margins and mortality. Currently, the Company’s long-term assumption for net separate account investment performance is approximately 7% growth per year and varies by product. The Company reviews this assumption, like others, as part of its annual process. If this assumption were unlocked, the date of the unlocking could become the anchor date used in the reversion to the mean process (defined below). Variances from the long-term assumption are expected since the majority of the investments in the underlying separate accounts are in equity securities, which strongly correlate in the aggregate with the Standard & Poor’s (S&P) 500 Index. The Company bases its reversion to the mean process on actual net separate account investment performance from the anchor date to the valuation date. The Company then assumes different performance levels over the next three years such that the separate account mean return measured from the anchor date to the end of the life of the product equals the long-term assumption. The assumed net separate account investment performance used in the DAC models is intended to reflect what is anticipated. However, based on historical returns of the S&P 500 Index, and as part of its pre-set parameters, the Company’s reversion to the mean process generally limits net separate account investment performance to 0-15% during the three-year reversion period.

Changes in assumptions can have a significant impact on the amount of DAC reported for investment and universal life insurance products and their related amortization patterns. In the event actual experience differs from assumptions or future assumptions are revised, the Company is required to record an increase or decrease in DAC amortization expense, which could be significant. In general, increases in the estimated long-term general and separate account returns result in increased expected future profitability and may lower the rate of DAC amortization, while increases in long-term lapse/surrender and mortality assumptions reduce the expected future profitability of the underlying business and may increase the rate of DAC amortization.

In addition to the comprehensive annual study of assumptions, management evaluates the appropriateness of the individual variable annuity DAC balance quarterly within pre-set parameters. These parameters are designed to appropriately reflect the Company’s long-term expectations with respect to individual variable annuity contracts while also evaluating the potential impact of short-term experience on the Company’s recorded individual variable annuity DAC balance. If the recorded balance of individual variable annuity DAC falls outside of these parameters for a prescribed period, or if the recorded balance falls outside of these parameters and management determines it is not reasonably possible to get back within the parameters during a given period, assumptions are required to be unlocked, and DAC is recalculated using revised best estimate assumptions. When DAC assumptions are unlocked and revised, the Company continues to use the reversion to the mean process.

NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES

(a wholly-owned subsidiary of Nationwide Financial Services, Inc.)

Notes to Consolidated Financial Statements, Continued

December 31, 2009, 2008 and 2007

See Note 7 for a discussion of assumption changes that impacted DAC amortization and related balances for 2007, 2008 and 2009.

Traditional life insurance products. Generally, DAC related to traditional life insurance products is amortized with interest over the premium-paying period of the related policies in proportion to the ratio of actual annual premium revenue to the anticipated total premium revenue. Such anticipated premium revenue is estimated using the same assumptions as those used for computing liabilities for future policy benefits at issuance. Under existing accounting guidance, the concept of DAC unlocking does not apply to traditional life insurance products, although evaluations of DAC for recoverability at the time of policy issuance and loss recognition testing at each reporting period are required.

(h) Value of Business Acquired

As a result of the acquisition of NFN in 2002 and the application of purchase accounting, the Company reports an intangible asset representing the estimated fair value of the business in force and the portion of the purchase price that was allocated to the value of the right to receive future cash flows from the life insurance and annuity contracts existing as of the closing date of the NFN acquisition. The value assigned to VOBA was supported by an independent valuation study commissioned by the Company and executed by a team of qualified valuation experts, including actuarial consultants. The expected future cash flows used in determining such value were based on actuarially determined projections by major lines of business of future policy and contract charges, premiums, mortality and morbidity, separate account performance, surrenders, changes in reserves, operating expenses, investment income and other factors. These projections considered all known or expected factors at the valuation date based on the judgment of management. The actual experience on purchased business, to some extent, has and may continue to vary from projections due to differences in renewal premiums, investment spreads, investment gains and losses, mortality and morbidity costs, or other factors.

Amortization of VOBA occurs with interest over the anticipated lives of the major lines of business to which it relates (initially ranging from 13 to 30 years) in relation to estimated gross profits, gross margins or premiums, as appropriate. If estimated gross profits, gross margins or premiums differ from expectations, the amortization of VOBA is adjusted on a retrospective or prospective basis, as appropriate. The VOBA asset related to investment products and universal life insurance products is adjusted annually for the impact of net unrealized gains and losses on securities available-for-sale had such gains and losses been realized and allocated to the product lines, as described in Note 2(c). The recoverability of VOBA is evaluated annually. If the evaluation indicates that the existing insurance liabilities, together with the present value of future net cash flows from the blocks of business acquired, is insufficient to recover VOBA, the difference, if any, is charged to expense as accelerated amortization of VOBA.

For those products amortized in relation to estimated gross profits, the most significant assumptions involved in the estimation of future gross profits include future net separate account performance, surrender/lapse rates, interest margins and mortality. The Company’s long-term assumption for net separate account performance is currently 7%. If actual net separate account performance varies from the 7% assumption, the Company assumes different performance levels over the next three years such that the mean return equals the long-term assumption. The assumed net separate account return assumptions used in the VOBA models are intended to reflect what is anticipated. However, based on historical returns of the S&P 500 Index, the Company’s reversion to the mean process generally limits returns to 0-15% during the three-year reversion period.

Changes in assumptions can have a significant impact on the amount of VOBA reported for all products and their related amortization patterns. In the event actual experience differs from assumptions or assumptions are revised, the Company is required to record an increase or decrease in VOBA amortization expense (VOBA unlocking), which could be significant. In general, increases in the estimated long-term general and separate account returns result in increased expected future profitability and may lower the rate of VOBA amortization, while increases in long-term lapse/surrender and mortality assumptions reduce the expected future profitability of the underlying business and may increase the rate of VOBA amortization.

NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES

(a wholly-owned subsidiary of Nationwide Financial Services, Inc.)

Notes to Consolidated Financial Statements, Continued

December 31, 2009, 2008 and 2007

The use of discount rates was necessary to establish fair values of VOBA acquired in the NFN transaction. In selecting the appropriate discount rates, management considered its weighted average cost of capital as well as the weighted average cost of capital required by market participants. In addition, consideration was given to the perceived risk of the assets acquired, which includes the expected growth and competitive profile of the life insurance market and the nature of the assumptions used in the valuation process. An after-tax discount rate of 11.0% was used to value VOBA, while after-tax discount rates ranging from 11.0% to 12.5% were used to value the other intangible assets acquired in the NFN transaction, as well as for net realized gains and losses, net of taxes, allocated to the closed block.

(i) Goodwill

In connection with acquisitions of operating entities, the Company recognizes the excess of the purchase price over the fair value of net assets acquired as goodwill. Goodwill is not amortized, but is evaluated for impairment at the reporting unit level annually in the third quarter. Goodwill of a reporting unit also is tested for impairment on an interim basis in addition to the annual evaluation if an event occurs or circumstances change which would more likely than not reduce the fair value of a reporting unit below its carrying amount.

The process of evaluating goodwill for impairment requires several judgments and assumptions to be made to determine the fair value of the reporting units, including the method used to determine fair value; discount rates; expected levels of cash flows, revenues and earnings; and the selection of comparable companies used to develop market-based assumptions. The Company performed its annual impairment test as of June 30, 2009.

(j) Closed Block

In connection with the sponsored demutualization of Provident Mutual Life Insurance Company (Provident) prior to its acquisition, Provident established a closed block for the benefit of certain classes of individual participating policies that had a dividend scale payable in 2001. Assets were allocated to the closed block in an amount that produces cash flows which, together with anticipated revenues from closed block business, is reasonably expected to be sufficient to provide for (1) payment of policy benefits, specified expenses and taxes, and (2) the continuation of dividends throughout the life of the Provident policies included in the closed block based upon the dividend scales payable for 2001, if the experience underlying such dividend scales continues.

Assets allocated to the closed block benefit only the holders of the policies included in the closed block and will not revert to the benefit of the Company. No reallocation, transfer, borrowing or lending of assets can be made between the closed block and other portions of the Company’s general account, any of its separate accounts, or any affiliate of the Company without the approval of the Pennsylvania Insurance Department (PID). The closed block will remain in effect as long as any policy in the closed block is in force.

If, over time, the aggregate performance of the closed block assets and policies is better than was assumed in funding the closed block, dividends to policyholders will increase. If, over time, the aggregate performance of the closed block assets and policies is less favorable than was assumed in the funding, dividends to policyholders could be reduced. If the closed block has insufficient funds to make guaranteed policy benefit payments, such payments will be made from the Company’s assets outside of the closed block, which are general account assets.

The assets and liabilities allocated to the closed block are recorded in the Company’s consolidated financial statements on the same basis as other similar assets and liabilities. The carrying amount of closed block liabilities in excess of the carrying amount of closed block assets at the date Provident was acquired by the Company represents the maximum future earnings from the assets and liabilities designated to the closed block that can be recognized in income, for the benefit of stockholders, over the period the policies in the closed block remain in force.

NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES

(a wholly-owned subsidiary of Nationwide Financial Services, Inc.)

Notes to Consolidated Financial Statements, Continued

December 31, 2009, 2008 and 2007

If actual cumulative earnings exceed expected cumulative earnings, the expected earnings are recognized in income. This is because the excess cumulative earnings over expected cumulative earnings, which represents undistributed accumulated earnings attributable to policyholders, is recorded as a policyholder dividend obligation. Therefore, the excess will be paid to closed block policyholders as an additional policyholder dividend expense in the future unless it is otherwise offset by future performance of the closed block that is less favorable than originally expected. If actual cumulative performance is less favorable than expected, actual earnings will be recognized in income.

The principal cash flow items that affect the amount of closed block assets and liabilities are premiums, net investment income, purchases and sales of investments, policyholder benefits, policyholder dividends, premium taxes and income taxes. The principal income and expense items excluded from the closed block are management and maintenance expenses, commissions, net investment income, and realized gains and losses on investments held outside of the closed block that support the closed block business, all of which enter into the determination of total gross margins of closed block policies for the purpose of the amortization of VOBA.

(k) Separate Accounts

Separate account assets and liabilities represent contractholders’ funds that have been legally segregated into accounts with specific investment objectives. Separate account assets are recorded at fair value and the Company primarily uses net asset value (NAV) to estimate the underlying fair value for certain mutual funds that do not have readily determinable fair values. The Company also uses market quotations to determine the underlying fair value of mutual funds when available. Investment income and realized investment gains or losses of these accounts accrue directly to the contractholders. The activity of the separate accounts is not reflected in the consolidated statements of income (loss) except for (1) the fees the Company receives, which are assessed on a daily or monthly basis and recognized as revenue when assessed and earned, and (2) the activity related to contract guarantees, which are riders to existing variable annuity contracts.

(l) Future Policy Benefits and Claims

The process of calculating reserve amounts for a life insurance organization involves the use of a number of assumptions, including those related to persistency (how long a contract stays with a company), mortality (the relative incidence of death in a given time), morbidity (the relative incidence of disability resulting from disease or physical impairment) and interest rates (the rates expected to be paid or received on financial instruments, including insurance or investment contracts).

The Company calculates its liability for future policy benefits and claims for investment products in the accumulation phase and universal life and variable universal life insurance policies as the policy account balance, which represents participants’ net premiums and deposits plus investment performance and interest credited less applicable contract charges.

The Company’s liability for funding agreements to an unrelated third party trust related to the medium-term note (MTN) program equals the balance that accrues to the benefit of the contractholder, including interest credited. The funding agreements constitute insurance obligations and are considered annuity contracts under Ohio insurance laws.

The liability for future policy benefits and claims for traditional life insurance policies was determined using the net level premium method using interest rates varying from 2.0% to 10.5% and estimates of mortality, morbidity, investment yields and withdrawals that were used or being experienced at the time the policies were issued.

The liability for future policy benefits for payout annuities was calculated using the present value of future benefits and maintenance costs discounted using interest rates varying generally from 3.0% to 13.0%.

(m) Participating Business

Participating business, which refers to policies that participate in profits through policyholder dividends, represented approximately 4% of the Company’s life insurance in force in 2009 (5% in 2008 and 6% in 2007), 51% of the number of life insurance policies in force in 2009 (54% in 2008 and 56% in 2007) and 12% of life insurance statutory premiums in 2009 (12% in 2008 and 12% in 2007). The provision for policyholder dividends was based on the current dividend scales and has been included in future policy benefits and claims in the consolidated balance sheets.

NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES

(a wholly-owned subsidiary of Nationwide Financial Services, Inc.)

Notes to Consolidated Financial Statements, Continued

December 31, 2009, 2008 and 2007

(n) Federal Income Taxes

The Company provides for federal income taxes based on amounts the Company believes it ultimately will owe. Inherent in the provision for federal income taxes are estimates regarding the deductibility of certain items and the realization of certain tax credits. In the event the ultimate deductibility of certain items or the realization of certain tax credits differs from estimates, the Company may be required to significantly change the provision for federal income taxes recorded in the consolidated financial statements. Any such change could significantly affect the amounts reported in the consolidated statements of income (loss).

The Company utilizes the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under this method, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Valuation allowances are established when it is determined that it is more likely than not that the deferred tax asset will not be fully realized.

(o) Reinsurance Ceded

Reinsurance premiums ceded and reinsurance recoveries on benefits and claims incurred are deducted from the respective income and expense accounts. Assets and liabilities related to reinsurance ceded generally are reported in the consolidated balance sheets on a gross basis, separately from the related future policy benefits and claims of the Company. The ceding of risk does not discharge the original insurer from its primary obligation to the policyholder.

(p) NLICA Merger

On December 31, 2009, NLIC merged with its affiliate, NLICA, with NLIC as the surviving entity. In addition, NLIC’s subsidiary, NLAIC, merged with a subsidiary of NLICA, NLACA, effective as of December 31, 2009, with NLAIC as the surviving entity. The merger was accounted for at historical cost in a manner similar to a pooling of interests because the involved entities are under common control. NLICA and subsidiaries are reflected in the Company’s current and prior year consolidated financial statements at the historical cost of the transferred net assets to provide comparative information as though the companies were combined for all periods presented. This presentation is consistent for both GAAP and Statutory reporting. Since NLICA and NLACA are wholly-owned subsidiaries, there is no noncontrolling interest impact.

The Company has presented its consolidated financial statements and accompanying notes as applicable for all years presented to reflect the NLICA merger.

The following tables summarize the impact of the items described above for the years ended December 31 (in millions):

	2009
Total revenues	$	375.5
Total benefits and expenses		357.3
Federal income tax benefit		(4.9	)
Net income	$	23.1
	2008
Total revenues	$	411.0
Total benefits and expenses		395.7
Federal income tax expense		0.5
Net income	$	14.8
	2007
Total revenues	$	510.0
Total benefits and expenses		412.7
Federal income tax expense		(18.8	)
Net income	$	78.5

(q) Change in Accounting Principle

In April 2009, the FASB issued guidance under FASB ASC 320, Investments – Debt and Equity Securities (FASB Staff Position (FSP), FAS 115-2 and FAS 124-2, Recognition and Presentation of Other-Than-Temporary Impairments). The Company adopted this guidance as of January 1, 2009. The adoption of this guidance resulted in a cumulative-effect adjustment of $249.7 million, net of taxes, as an adjustment to the opening balance of retained earnings with a corresponding adjustment to the opening balance of AOCI.

Historically, the Company accrued for legal costs associated with litigation defense and regulatory investigations by estimating the ultimate costs of such activity. Beginning April 1, 2007, the Company’s accrual for such legal expenses includes only the amount for services that have been provided but not yet paid. The Company believes the newly adopted accounting principle is preferable because it more accurately reflects expenses in the periods in which they are incurred. The Company continues to estimate and accrue the ultimate amounts expected to be paid for litigation and regulatory investigation loss contingencies. The Company has presented its consolidated financial statements and accompanying notes as applicable for all periods presented to retroactively apply the adoption of this change in accounting principle, which lowered net income by $1.9 million in 2007.

NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES

(a wholly-owned subsidiary of Nationwide Financial Services, Inc.)

Notes to Consolidated Financial Statements, Continued

December 31, 2009, 2008 and 2007

(3) Recently Issued Accounting Standards  

In January 2010, the FASB issued Accounting Standards Update (ASU) 2010-02, which amends FASB ASC 810, Consolidation. This guidance clarifies the scope of the decrease in the ownership provisions and applies to a subsidiary or group of assets that is a business or nonprofit activity, a subsidiary that is a business or nonprofit activity that is transferred to an equity method investee or joint venture, and an exchange of a group of assets that constitutes a business or nonprofit activity for a noncontrolling interest in an entity. This guidance would not be applied to sales of in-substance real estate. If a decrease in ownership occurs in a subsidiary that is not a business or nonprofit activity, an entity first needs to consider whether the substance of the transaction causing the decrease in ownership is addressed in other GAAP, such as transfers of financial assets, revenue recognition, exchanges of nonmonetary assets, or sales of in substance real estate, and apply that guidance as applicable. If no other guidance exists, an entity should apply the guidance in FASB ASC 810-10. This guidance also expands the disclosures about the deconsolidation of a subsidiary or derecognition of a group of assets within the scope of FASB ASC 810-10. In addition to existing disclosures, this guidance requires for such a deconsolidation or derecognition additional disclosures regarding valuation techniques, the nature of continuing involvement with the subsidiary or entity acquiring the group of assets, and whether the transaction was with a related party or whether the former subsidiary or entity acquiring the group of assets will be a related party. The Company adopted this guidance effective December 31, 2009. The adoption of this guidance did not have a material impact on the consolidated financial statements of the Company. The guidance will be applied to prospective transactions, as is required.

In January 2010, the FASB issued ASU 2010-06, which amends FASB ASC 820, Fair Value Measurement and Disclosures. This guidance requires new disclosures and provides amendments to clarify existing disclosures. The new requirements include disclosing transfers in and out of Levels 1 and 2 fair value measurements and the reasons for the transfers and further disaggregating activity in Level 3 fair value measurements. The clarification of existing disclosure guidance includes further disaggregation of fair value measurement disclosures for each class of assets and liabilities and providing disclosures about the valuation techniques and inputs used to measure fair value for both recurring and nonrecurring fair value measurements. The guidance also includes conforming amendments to the guidance on employers’ disclosures about the postretirement benefit plan assets. This guidance is effective for interim and annual reporting periods beginning after December 15, 2009, except for the new disclosures regarding the activity in Level 3 measurements, which shall be effective for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years. The Company will adopt this guidance for the fiscal period beginning January 1, 2010, except for the new disclosure regarding the activity in level 3 measurements, which the Company will adopt for the fiscal period beginning January 1, 2011.

In September 2009 the FASB issued ASU 2009-12, which amends FASB ASC 820, Fair Value Measurements and Disclosures. This guidance applies to reporting entities that hold an investment that is required or permitted to be measured or disclosed at fair value on a recurring or nonrecurring basis but does not have a readily determinable fair value and has attributes of a investment company. For these investments, this update allows, as a practical expedient, the use of NAV as the basis to estimate fair value as long as it is not probable, as of the measurement date, that the investment will be sold and NAV is not the value that will be used in the sale. The NAV must be calculated consistent with the American Institute of Certified Public Accountants Audit and Accounting Guide, Investment Companies, which generally requires these investments to be measured at fair value. Additionally, the guidance provides updated disclosures for investments within its scope and notes that if the investor can redeem the investment with the investee on the measurement date at NAV, the investment should likely be classified as Level 2 in the fair value hierarchy. Investments that cannot be redeemed with the investee at NAV would generally be classified as Level 3 in the fair value hierarchy. If the investment is not redeemable with the investee on the measurement date, but will be at a future date, the length of time until the investment is redeemable should be considered in determining classification as Level 2 or 3. This guidance is effective for interim and annual periods ending after December 15, 2009 with early adoption permitted. The Company adopted this guidance effective December 31, 2009. The adoption of this guidance did not have a material impact on the consolidated financial statements of the Company. See the required disclosures and updated fair value hierarchy disclosed within Note 4.

NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES

(a wholly-owned subsidiary of Nationwide Financial Services, Inc.)

Notes to Consolidated Financial Statements, Continued

December 31, 2009, 2008 and 2007

In August 2009 the FASB issued ASU 2009-05, which amends FASB ASC 820-10, Fair Value Measurements and Disclosures. This guidance clarifies how the fair value of a liability should be determined. It reiterates that fair value is the price that would be paid to transfer the liability in an orderly transaction between market participants at the measurement date. It notes that the liability should reflect the company’s nonperformance risk and should not reflect restrictions on the transfer of the liability. To determine the exit price, the guidance permits companies to look to the identical liability traded as an asset, similar liabilities traded as assets, or another valuation technique to measure the price the company would pay to transfer the liability. The Company adopted this guidance effective the reporting period ending December 31, 2009. The adoption of this guidance did not have a material impact on the consolidated financial statements of the company.

In June 2009, the FASB issued guidance under FASB ASC 105, Generally Accepted Accounting Principles (Statement of Financial Accounting Standard (SFAS) No. 168, The FASB Accounting Standards CodificationTM and the Hierarchy of Generally Accepted Accounting Principles – a replacement of FASB Statement No. 162 (SFAS 168)). This guidance establishes the FASB ASC as the single source of authoritative GAAP recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the SEC under authority of federal securities laws are also sources of authoritative GAAP for SEC registrants. SFAS 168 and the ASC are effective for financial statements issued for interim and annual periods ending after September 15, 2009. The ASC supersedes all existing non-SEC accounting and reporting standards. All other non-grandfathered, non-SEC accounting literature not included in the ASC have become non-authoritative. Following SFAS 168, the FASB will no longer issue new standards in the form of Statements, FSPs, or EITF Abstracts. Instead, the FASB will issue Accounting Standards Updates, which will serve only to update the ASC, provide background information about the guidance, and provide the bases for conclusions on the change(s) in the ASC. The Company adopted SFAS 168 effective September 30, 2009. The adoption of this guidance did not have an impact on the Company’s consolidated financial statements but will alter the references to accounting literature within the consolidated financial statements.

In June 2009, the FASB issued guidance under FASB ASC 810 Consolidation (SFAS No. 167, Amendments to FASB Interpretation No. 46(R)). In February 2010, this guidance was amended by ASU 2010-10, which defers the application of SFAS No. 167 for certain interests in an entity that has all of the attributes of an investment company, or for which it is industry practice to apply measurement principles for financial reporting that are consistent with those investment companies apply, or the entity is a registered money market fund. An entity that qualifies for the deferral will continue to be assessed under the overall guidance on the consolidation of variable interest entities before the SFAS No. 167 amendments. ASU 2010-10 also clarifies other aspects of the SFAS No. 167 amendments. FASB ASC 810, Consolidation changes the consolidation guidance applicable to a variable interest entity (VIE). It also amends the guidance governing the determination of whether an entity is the VIE’s primary beneficiary (the reporting entity that must consolidate the VIE) by requiring a qualitative analysis rather than a quantitative analysis. The qualitative analysis will include consideration of who has the power to direct the activities of the entity that most significantly impacts the entity’s economic performance and who has the obligation to absorb losses or the right to receive benefits of the VIE that could potentially be significant to the VIE. This guidance also requires continuous reassessment of whether an enterprise is the primary beneficiary of a VIE. Before this guidance, FASB Interpretation No. 46(R) required reconsideration of whether an enterprise was the primary beneficiary of a VIE only when specific events had occurred. This guidance also requires enhanced disclosures about an entity’s involvement with a VIE. This guidance is effective for fiscal and interim reporting periods beginning after November 15, 2009. The Company is in the process of determining the impact of adopting this guidance.

In June 2009, the FASB issued guidance under FASB ASC 860, Transfers and Servicing (SFAS No. 166, Accounting for Transfers of Financial Assets – an amendment of FASB Statement No. 140). This guidance eliminates the concept of a qualifying special-purpose entity (QSPE) and clarifies and amends the derecognition criteria for a transfer to be accounted for as a sale and the unit of account eligible for sale accounting. Additionally, this guidance requires a transferor to initially measure and recognize all assets obtained (including a transferor’s beneficial interest) and liabilities incurred as a result of a transfer of financial assets accounted for as a sale at fair value. Additionally, on and after the effective date, existing QSPEs (as defined under previous accounting standards) must be evaluated for consolidation in accordance with the applicable consolidation guidance. This guidance also establishes new requirements for reporting a transfer of a portion of a financial asset as a sale. This guidance requires enhanced disclosures about, among other things, a transferor’s continuing involvement with transfers of financial assets accounted for as sales, the risks inherent in the transferred financial assets that have been retained, and the nature and financial effect of restrictions on the transferor’s assets that continue to be reported in the consolidated balance sheets. This guidance is effective for fiscal and interim reporting periods beginning after November 15, 2009. The Company adopted this guidance effective January 1, 2010. The guidance will be applied to prospective transactions, as is required.

NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES

(a wholly-owned subsidiary of Nationwide Financial Services, Inc.)

Notes to Consolidated Financial Statements, Continued

December 31, 2009, 2008 and 2007

In May 2009, the FASB issued guidance under FASB ASC 855, Subsequent Events (SFAS No. 165, Subsequent Events). This guidance establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued. In particular, this guidance sets forth the period after the balance sheet date during which management of a reporting entity should evaluate events or transactions that may occur for potential recognition or disclosure, the circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its financial statements, and the disclosures an entity should make about events or transactions that occurred after the balance sheet date. This guidance is effective for fiscal years and interim periods ending after June 15, 2009. The Company adopted this guidance effective June 30, 2009. The adoption of this guidance did not have a material impact on the consolidated financial statements of the Company. See Note 2 (b) for the required disclosure.

In April 2009, the FASB issued guidance under FASB ASC 320, Investments – Debt and Equity Securities FSP FAS 115-2 and FAS 124-2, Recognition and Presentation of Other-Than-Temporary Impairments). This guidance is designed to create greater clarity and consistency in accounting for and presentation of impairment losses on debt securities. This guidance is effective for interim and annual periods ending after June 15, 2009 with early adoption permitted. As of the beginning of the interim period of adoption, this guidance requires a cumulative-effect adjustment to reclassify the non-credit component of previously recognized other-than-temporary impairment losses on debt securities from retained earnings to the beginning balance of AOCI. The Company adopted this guidance as of January 1, 2009. The adoption of this guidance resulted in a cumulative-effect adjustment of $249.7 million, net of taxes, as an adjustment to the opening balance of retained earnings with a corresponding adjustment to the opening balance of AOCI.

In April 2009, the FASB issued guidance under FASB ASC 820-10, Fair Value Measurements and Disclosures (FSP FAS 157-4, Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly). This guidance provides guidelines for making fair value measurements more consistent with the principles presented in the previous standard SFAS No. 157, Fair Value Measurements. This guidance is effective for interim and annual periods ending after June 15, 2009 with early adoption permitted. The Company elected to early adopt this guidance as of January 1, 2009.

In December 2008, the FASB issued guidance under FASB ASC 715, Compensation – Retirement Benefits (FSP FAS 132R-1). This guidance amends previous SFAS No. 132 (revised 2003), Employers’ Disclosures about Pensions and Other Postretirement Benefit, to provide guidance on an employer’s disclosures about plan assets of a defined benefit pension or other postretirement plan. The portion of this guidance related to the disclosures about plan assets is effective for fiscal years ending after December 15, 2009. This guidance will have no impact on the Company’s disclosures.

In November 2008, the FASB issued guidance under FASB ASC 350-30, Intangibles – Goodwill and Other, General Intangibles Other than Goodwill (EITF 08-7, Accounting for Defensive Intangible Assets). This guidance requires defensive intangible assets acquired in a business combination or asset acquisition to be accounted for as a separate unit of accounting. In doing so, the asset should not be included as part of the cost of an entity’s existing intangible asset(s) because the defensive intangible asset is separately identifiable. This guidance is effective for intangible assets acquired on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. The Company adopted this guidance effective January 1, 2009. On the date of adoption, there was no impact to the Company’s financial position or results of operations. The Company will apply this guidance prospectively for intangible assets acquired on or after January 1, 2009.

In November 2008, the FASB issued guidance under FASB ASC 323-10, Investments – Equity Method and Joint Ventures (EITF 08-6, Equity Method Investment Accounting Considerations). This guidance clarifies how to account for certain transactions and impairment considerations involving equity method investments. Specifically, this guidance notes: 1) an entity shall measure its equity method investment initially at cost; 2) an equity method investor is required to recognize other-than-temporary impairments of an equity method investment in accordance with paragraph 35-32A and an equity method investor shall not separately test an investee’s underlying indefinite-lived intangible asset(s) for impairment; and 3) an equity method investor shall account for a share issuance by an investee as if the investor had sold a proportionate share of its investment and any gain or loss to the investor resulting from an investee’s share issuance shall be recognized in earnings. This guidance is effective on a prospective basis in fiscal years beginning on or after December 15, 2008, and interim periods within those fiscal years. The Company adopted this guidance prospectively beginning January 1, 2009. On the date of adoption, there was no impact to the Company’s financial position or results of operations.

NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES

(a wholly-owned subsidiary of Nationwide Financial Services, Inc.)

Notes to Consolidated Financial Statements, Continued

December 31, 2009, 2008 and 2007

In April 2008, the FASB issued guidance under FASB ASC 350-30, General Intangibles other than Goodwill (FSP FAS 142-3, Determination of the Useful Life of Intangible Assets). This guidance amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under previous SFAS No. 142, Goodwill and Other Intangible Assets (SFAS 142). This guidance is effective for financial statements issued for fiscal years and interim periods beginning after December 15, 2008. The amended factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under SFAS 142 are to be applied prospectively to intangible assets acquired after the effective date. The Company adopted this guidance effective January 1, 2009. On the date of adoption, there was no impact to the Company’s financial position or results of operations. The Company will apply this guidance prospectively to intangible assets acquired after January 1, 2009.

In March 2008, the FASB issued guidance under FASB ASC 815, Derivatives and Hedging (SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB Statement No. 133). This guidance amends and expands the disclosure requirements of previous SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities (SFAS 133), with the intent to provide users of financial statements with an enhanced understanding of how and why an entity uses derivative instruments, how derivative instruments and related hedged items are accounted for and how derivative instruments and related hedged items affect an entity’s financial position, financial performance and cash flows. This guidance requires qualitative disclosures about objectives and strategies for using derivatives, quantitative disclosures about derivative instrument fair values and related gains and losses, and disclosures about credit-risk-related contingent features in derivative agreements. This guidance is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008. The Company adopted this guidance effective January 1, 2009. See Note 5 for required disclosures.

In February 2008, the FASB issued guidance under FASB ASC 820, Fair Value Measurements and Disclosures (FSP FAS 157-2, Effective Date of FASB Statement No. 157). This guidance delayed the effective date of SFAS 157 for nonfinancial assets and liabilities until fiscal years and interim periods beginning after November 15, 2008. FASB ASC 820 applies to nonfinancial assets and liabilities, except for items recognized or disclosed at fair value in the Company’s financial statements on a recurring basis (at least annually), and is effective upon issuance. The Company adopted this guidance effective January 1, 2009. On the date of adoption, there was no impact to the Company’s financial position or results of operations.

In December 2007, the FASB issued guidance under FASB ASC 805, Business Combination, (SFAS No. 141 (revised 2007), Business Combinations (SFAS 141R), which replaced SFAS No. 141, Business Combinations). The objective of this guidance is to improve the relevance, representational faithfulness, and comparability of the information a reporting entity provides in its financial reports about a business combination and its effects. Accordingly, this guidance establishes principles and requirements for how the acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree; recognizes and measures the goodwill acquired in the business combination or a gain from a bargain purchase; and determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. This guidance applies to all transactions or other events in which an entity obtains control of one or more businesses and retains the fundamental requirements in the previous standard that the acquisition method of accounting be used for all business combinations and for an acquirer to be identified for each business combination. This guidance defines the acquirer as the entity that obtains control of one or more businesses in the business combination and establishes the acquisition date as the date the acquirer achieves control. This guidance is applicable prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. Earlier application is prohibited. The Company adopted this guidance effective January 1, 2009. The Company applied this guidance prospectively to business combination on or after January 1, 2009.

NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES

(a wholly-owned subsidiary of Nationwide Financial Services, Inc.)

Notes to Consolidated Financial Statements, Continued

December 31, 2009, 2008 and 2007

In April 2009, the FASB issued guidance under FASB ASC 805-20, Business Combinations – Identifiable Assets and Liabilities, and Any Noncontrolling Interest (FSP FAS 141R-1, Accounting for Assets Acquired and Liabilities Assumed in a Business Combination That Arise from Contingencies). This guidance amends previous business combination guidance related to contingencies. First, this guidance requires the acquirer to recognize the contingency at fair value, at the acquisition date, if the acquisition-date fair value of that asset or liability can be determined during the measurement period. Second, if the first criteria is not applicable as the fair value of the asset or liability cannot be determined during the measurement period, then the contingency shall be recognized if both (a) information available before the end of the measurement period indicates it is probable an asset existed or a liability had been incurred at the acquisition date and (b) the amount of the asset or liability can be reasonably estimated. If neither of these acquisition date recognition criterion apply, the acquirer shall not recognize an asset or liability as of the acquisition date. In periods after the acquisition date, the acquirer shall account for an asset or a liability arising from a contingency that does not meet the recognition criteria at the acquisition date in accordance with other applicable GAAP, including FASB ASC 450, Contingencies, as appropriate. The Company will apply this guidance prospectively to any business combination on or after January 1, 2009.

In December 2007, the FASB issued guidance under FASB ASC 810, Consolidation (SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements, an Amendment of ARB No. 51). The objective of this guidance is to improve the relevance, comparability, and transparency of the financial information that a reporting entity provides in its consolidated financial statements by establishing accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. This guidance also amends certain consolidation procedures prescribed by previous Accounting Research Bulletin No. 51, Consolidated Financial Statements. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008. The Company adopted this guidance effective January 1, 2009. The required presentation of noncontrolling interests is reflected in the consolidated financial statements. As a result of adoption, the Company reclassified $416.0 million from other liabilities to equity as of December 31, 2008, representing the noncontrolling interest of low-income-housing tax credit funds (LIHTC Funds). See Note 20 for further discussion on the LIHTC Funds. The accounting requirements of this guidance will be applied to any transactions involving noncontrolling interests on or after January 1, 2009.

In September 2005, the FASB issued guidance under FASB ASC 944-30, Financial Services – Insurance – Acquisition Costs, (Statement of Position No. 05-1). This guidance provides guidance on accounting by insurance enterprises for deferred acquisition costs on internal replacements of insurance and investment contracts other than those specifically described in FASB ASC 944, Financial Services – Insurance. This guidance defines an internal replacement as a modification in product benefits, features, rights or coverages that occurs as a result of the exchange of a contract for a new contract, or by amendment, endorsement or rider to a contract, or by the election of a new feature or coverage within a contract. This guidance was effective for internal replacements occurring in fiscal years beginning after December 15, 2006. Retrospective application of this guidance to previously issued financial statements was not permitted. Initial application was required as of the beginning of an entity’s fiscal year. The Company adopted this guidance effective January 1, 2007, which resulted in a $6.0 million charge, net of taxes, as the cumulative effect of adoption of this accounting principle.

NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES

(a wholly-owned subsidiary of Nationwide Financial Services, Inc.)

Notes to Consolidated Financial Statements, Continued

December 31, 2009, 2008 and 2007

(4) Fair Value Measurements  

Fair Value Option

Effective January 1, 2008, the Company elected fair value treatment for commercial mortgage loans held for sale. Accordingly, the Company now records in earnings all market fluctuations associated with this portfolio. The Company previously recorded such loans at the lower of cost or market value. Balances for these loans are measured at fair value prospectively with unrealized gains and losses included as a component of net realized investment gains and losses. The Company will assess the fair value option election for newly acquired financial assets or liabilities on a prospective basis. The fair value election is an irreversible election.

Fair Value Hierarchy

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In determining fair value, the Company uses various methods including market, income and cost approaches. The Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs.

The Company categorizes its financial instruments into a three level hierarchy based on the priority of the inputs to the valuation technique. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). If the inputs used to measure fair value fall within different levels of the hierarchy, the category level is based on the lowest priority level input that is significant to the fair value measurement of the instrument in its entirety.

The Company categorizes financial assets and liabilities recorded at fair value in the consolidated balance sheets as follows:

• Level 1 – Unadjusted quoted prices accessible in active markets for identical assets or liabilities at the measurement date.  

• Level 2 – Unadjusted quoted prices for similar assets or liabilities in active markets or inputs (other than quoted prices) that are observable or that are derived principally from or corroborated by observable market data through correlation or other means.  

• Level 3 – Prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. Inputs reflect management’s best estimate about the assumptions market participants would use at the measurement date in pricing the asset or liability. Consideration is given to the risk inherent in both the method of valuation and the valuation inputs.  

For certain residential mortgage-backed securities backed by Prime, sub-prime and Alt-A collateral, which are included in Level 3 financial assets, the Company utilizes internal pricing models to assist in determining the estimated fair values. As of December 31, 2008, these investments were priced solely with the assistance of independent pricing services. As a result of continued low levels of activity in these markets during 2009, management believes that prices are no longer representative of the investments’ fair value, which is the price that would be received upon the sale of the investment in an orderly transaction (that is, not a forced liquidation or distressed sale) between market participants at the measurement date. The Company believes that a weighting of internal pricing models and independent pricing services represents a better estimate of the investments’ fair value and complies with FASB ASC 820, Fair Value Measurements and Disclosures.

Therefore, management determined that the use of multiple valuation techniques, considering both an income approach that maximizes the use of relevant observable inputs and minimizes the use of unobservable inputs and a market approach that observes quotes provided by independent pricing services produces a result more representative of an investment’s fair value.

NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES

(a wholly-owned subsidiary of Nationwide Financial Services, Inc.)

Notes to Consolidated Financial Statements, Continued

December 31, 2009, 2008 and 2007

The income approach incorporates cash flows for each investment adjusted for expected losses in different interest rate and housing scenarios. The adjusted cash flows are then discounted using a risk premium that market participants would demand because of the risk in the cash flows. The risk premium is reflective of an orderly transaction between market participants at the measurement date under current market conditions and includes items such as liquidity and structure risk. The income approach also includes a weighting of external third party values. As sufficient information is often not available to conclude whether such prices are based on orderly transactions, this weighting methodology is designed to incorporate external prices into the Company’s internal valuation process.

In addition to weighting external prices in developing the internal values, the Company further calibrates those values to market indications through obtaining pricing from two independent pricing services (the market approach). The Company calibrates the prices obtained from the independent pricing services and the price developed internally by utilizing the median value to determine the estimated fair value.

In addition, certain of the Company’s investments in corporate debt securities, mortgage-backed securities and other asset-backed securities were valued with the assistance of independent pricing services and non-binding broker quotes. The Company’s policy is to use the pricing obtained from our primary independent pricing service even in cases where a price is obtained from both an independent pricing service and a broker. In the event that pricing information is not available from an independent pricing service, non-binding broker quotes are used to assist in the valuation of the investments. In many cases, only one broker quote is available. The Company’s policy is generally not to adjust the values obtained from brokers.

Broker quotes are considered unobservable inputs as only one broker quote is ordinarily obtained, the investment is not traded on an exchange, the pricing is not available to other entities and the transaction volume in the same or similar investments has decreased such that generally only one quotation is available. As the brokers often do not provide the necessary transparency into their quotes and methodologies, the Company periodically performs reviews and tests to ensure that quotes are a reasonable estimate of the investments’ fair value.

For investments valued with the assistance of independent pricing services, the Company obtained the pricing services’ methodologies and classified these investments accordingly in the fair value hierarchy. The Company periodically reviews and tests the pricing and related methodologies obtained from these independent pricing services against secondary sources to ensure that management can validate the investment’s fair value and related categorization. If large variances are observed between the price obtained from the independent pricing services and secondary sources, the Company analyzes the causes driving the variance and resolves any differences.

As of December 31, 2009, 68% of the prices of fixed maturity securities were valued with the assistance of independent pricing services, 13% were valued with the assistance of the Company’s internal pricing processes, 11% were valued with the assistance of the Company’s pricing matrices, 6% were valued with the assistance of broker quotes and 2% were valued from other sources compared to 78%, 4%, 12%, 5% and 1%, respectively, as of December 31, 2008.

NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES

(a wholly-owned subsidiary of Nationwide Financial Services, Inc.)

Notes to Consolidated Financial Statements, Continued

December 31, 2009, 2008 and 2007

Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent)

The Company uses NAV to estimate the underlying fair value for certain mutual funds that do not have readily determinable fair values included in separate account assets.

All but one of these mutual funds are included in Level 2 and had fair values totaling $44.00 billion as of December 31, 2009. See the following paragraph for discussion of the mutual fund considered Level 3. These funds have no unfunded commitments or restrictions and the Company always has the ability to redeem the separate account investment in these funds with the investee at NAV daily. These mutual funds are primarily invested in domestic and international equity funds.

The Company’s separate account assets include an investment in a mutual fund that may not be redeemed until a seven year guarantee period expires in 2016; however, NAV has been used to estimate the fair value of this investment as a practical expedient. This fund has no unfunded commitments or other restrictions. The investment strategy of this fund is to build a portfolio where the assets shall be sufficient to achieve a target portfolio value by the end of the seven year guarantee period. The Company’s portion of the net asset value of this fund reported in separate account assets was $975.9 million as of December 31, 2009 and is included in Level 3.

Since separate account assets include mutual fund investments not directed by the Company, the contractholders have the ability to select and change investment categories, which may result in the underlying mutual funds being purchased and sold in the future.

NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES

(a wholly-owned subsidiary of Nationwide Financial Services, Inc.)

Notes to Consolidated Financial Statements, Continued

December 31, 2009, 2008 and 2007

The following table summarizes assets and liabilities measured at fair value on a recurring basis as of December 31, 2009:

(in millions)	Level 1			Level 2			Level 3			Total
Assets
Investments:
Securities available-for-sale:
Fixed maturity securities:
U.S. Treasury securities and obligations of U.S. Government corporations and agencies	$	747.9		$	4.4		$	1.6		$	753.9
Obligations of states and political subdivisions		—			548.9			—			548.9
Debt securities issued by foreign governments		—			75.1			—			75.1
Corporate securities		1.8			14,557.0			1,402.2			15,961.0
Residential mortgage-backed securities		229.3			3,245.9			2,033.7			5,508.9
Commercial mortgage-backed securities		—			678.8			405.3			1,084.1
Collateralized debt obligations		—			131.5			240.5			372.0
Other asset-backed securities		—			278.6			167.2			445.8
Total fixed maturity securities		979.0			19,520.2			4,250.5			24,749.7
Equity securities		12.6			32.4			7.6			52.6
Total securities available-for-sale		991.6			19,552.6			4,258.1			24,802.3
Mortgage loans held for sale1		—			—			47.9			47.9
Short-term investments		56.1			947.3			—			1,003.4
Total investments		1,047.7			20,499.9			4,306.0			25,853.6
Cash and cash equivalents		49.1			—			—			49.1
Derivative assets2		—			497.5			331.2			828.7
Separate account assets3,5		11,607.8			44,610.9			1,627.5			57,846.2
Total assets	$	12,704.6		$	65,608.3		$	6,264.7		$	84,577.6
Liabilities
Future policy benefits and claims4	$	—		$	—		$	(310.9	)	$	(310.9	)
Derivative liabilities2		(10.3	)		(404.0	)		(1.5	)		(415.8	)
Total liabilities	$	(10.3	)	$	(404.0	)	$	(312.4	)	$	(726.7	)

1 Elected to be carried at fair value.  

2 Comprised of interest rate swaps, cross-currency swaps, credit default swaps, other non-hedging derivative instruments, equity option contracts and interest rate futures contracts.  

3 Comprised of public, privately registered and non-registered mutual funds and investments in securities.  

4 Related to embedded derivatives associated with living benefit contracts. The Company’s guaranteed minimum accumulation benefits (GMABs), guaranteed lifetime withdrawal benefits (GLWBs) and hybrid GMABs/GLWBs are considered embedded derivatives requiring the related liabilities to be separated from the host insurance product and recognized at fair value, with changes in fair value reported in earnings. This balance also includes embedded derivatives associated with fixed equity-indexed annuities (EIA) of $45.0 million that provide for interest earnings that are linked to the performance of specified equity market indices.  

5 The fair value of separate account liabilities is set to equal the fair value of separate account assets  

NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES

(a wholly-owned subsidiary of Nationwide Financial Services, Inc.)

Notes to Consolidated Financial Statements, Continued

December 31, 2009, 2008 and 2007

The following table summarizes assets and liabilities measured at fair value on a recurring basis as of December 31, 2008:

(in millions)	Level 1			Level 2			Level 3			Total
Assets
Investments:
Securities available-for-sale:
Fixed maturity securities:
U.S. Treasury securities and obligations of U.S. Government corporations and agencies	$	609.2		$	4.3		$	1.9		$	615.4
Obligations of states and political subdivisions		—			224.7			—			224.7
Debt securities issued by foreign governments		—			55.5			—			55.5
Corporate securities		2.0			11,263.8			1,327.3			12,593.1
Residential mortgage-backed securities		600.7			2,398.1			3,035.9			6,034.7
Commercial mortgage-backed securities		—			700.0			263.4			963.4
Collateralized debt obligations		—			73.0			250.4			323.4
Other asset-backed securities		—			465.5			111.8			577.3
Total fixed maturity securities		1,211.9			15,184.9			4,990.7			21,387.5
Equity securities		1.4			34.8			17.9			54.1
Total securities available-for-sale		1,213.3			15,219.7			5,008.6			21,441.6
Mortgage loans held for sale1		—			—			124.5			124.5
Short-term investments		158.7			2,754.3			—			2,913.0
Total investments		1,372.0			17,974.0			5,133.1			24,479.1
Cash and cash equivalents		42.0			—			—			42.0
Derivative assets2		—			708.5			597.6			1,306.1
Separate account assets3,5		9,975.7			36,723.5			2,141.8			48,841.0
Total assets	$	11,389.7		$	55,406.0		$	7,872.5		$	74,668.2
Liabilities
Future policy benefits and claims4	$	—		$	—		$	(1,739.7	)	$	(1,739.7	)
Derivative liabilities2		(6.0	)		(385.9	)		(4.2	)		(396.1	)
Total liabilities	$	(6.0	)	$	(385.9	)	$	(1,743.9	)	$	(2,135.8	)

1 Elected to be carried at fair value.  

2 Comprised of interest rate swaps, cross-currency swaps, credit default swaps, other non-hedging derivative instruments, equity option contracts and interest rate futures contracts.  

3 Comprised of public, privately registered and non-registered mutual funds and investments in securities.  

4 Related to embedded derivatives associated with living benefit contracts. The Company’s GMABs, GLWBs and hybrid GMABs/GMWBs are considered embedded derivatives requiring the related liabilities to be separated from the host insurance product and recognized at fair value, with changes in fair value reported in earnings. This balance also includes embedded derivatives associated with fixed EIAs of $41.7 million that provide for interest earnings that are linked to the performance of specified equity market indices.  

5 The fair value of separate account liabilities is set to equal the fair value of separate account assets.  

NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES

(a wholly-owned subsidiary of Nationwide Financial Services, Inc.)

Notes to Consolidated Financial Statements, Continued

December 31, 2009, 2008 and 2007

The following table summarizes financial instruments for which the Company used significant unobservable inputs (Level 3) to determine fair value measurements for the year ended December 31, 2009:

				Net investment gains (losses)																	Change in unrealized gains (losses) in earnings due to assets still held
(in millions)	Balance as of December 31, 2008			In earnings (realized and unrealized)1			In OCI (unrealized)2			Purchases, issuances, sales and settlements			Transfers in to Level 3		Transfers out of Level 3			Balance as of December 31, 2009
Assets
Investments:
Securities available-for-sale3:
Fixed maturity securities
U.S. Treasury securities and obligations of U.S. government corporations and agencies	$	1.9		$	—		$	(0.2	)	$	(0.1	)	$	—	$	—		$	1.6		$	—
Corporate securities		1,327.3			(80.3	)		260.3			(400.8	)		487.1		(191.4	)		1,402.2		$	—
Residential mortgage-backed securities		3,035.9			(111.0	)		388.7			(431.2	)		0.9		(849.6	)		2,033.7			—
Commercial mortgage-backed securities		263.4			(20.3	)		139.1			(7.1	)		94.1		(63.9	)		405.3			—
Collateralized debt obligations		250.4			(53.0	)		77.1			(18.2	)		—		(15.8	)		240.5			—
Other asset-backed securities		111.8			(16.5	)		43.5			(12.0	)		48.6		(8.2	)		167.2			—
Total fixed maturity securities		4,990.7			(281.1	)		908.5			(869.4	)		630.7		(1,128.9	)		4,250.5			—
Equity securities		17.9			1.4			0.7			3.9			—		(16.3	)		7.6			—
Total securities available-for-sale		5,008.6			(279.7	)		909.2			(865.5	)		630.7		(1,145.2	)		4,258.1			—
Mortgage loans held for sale		124.5			(7.6	)		—			(69.0	)		—		—			47.9			(2.8	)
Total investments		5,133.1			(287.3	)		909.2			(934.5	)		630.7		(1,145.2	)		4,306.0			(2.8	)
Derivative assets		597.6			(311.5	)		(12.0	)		57.1			—		—			331.2			(309.5	)
Separate account assets4,6		2,141.8			(646.7	)		—			400.0			14.7		(282.3	)		1,627.5			217.7
Total assets	$	7,872.5		$	(1,245.5	)	$	897.2		$	(477.4	)	$	645.4	$	(1,427.5	)	$	6,264.7		$	(94.6	)
Liabilities
Future policy benefits and claims5	$	(1,739.7	)	$	1,437.7		$	—		$	(8.9	)	$	—	$	—		$	(310.9	)	$	1,437.7
Derivative liabilities		(4.2	)		2.7			—			—			—		—			(1.5	)		2.7
Total liabilities	$	(1,743.9	)	$	1,440.4		$	—		$	(8.9	)	$	—	$	—		$	(312.4	)	$	1,440.4

1 Includes gains and losses on sales of financial instruments, changes in market value of certain instruments and other-than-temporary impairments. The net unrealized loss on separate account assets is attributable to contractholders and, therefore, is not included in the Company’s earnings.  

2 Includes changes in market value of certain instruments.  

3 Includes certain collateralized mortgage obligations, residential mortgage-backed securities, commercial mortgage-backed securities, other ABSs, certain broker or internally priced securities and securities that are at or near default based on ratings assigned by the National Association of Insurance Commissioners (NAIC) (see Note 6 for a discussion of NAIC designations. Equity securities represent holdings in non-registered mutual funds with significant unobservable inputs.  

4 Comprised of non-registered mutual funds with significant unobservable and/or liquidity restrictions. The net unrealized investment loss on these non-registered mutual funds is attributable to contractholders and, therefore, is not included in the Company’s earnings.  

NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES

(a wholly-owned subsidiary of Nationwide Financial Services, Inc.)

Notes to Consolidated Financial Statements, Continued

December 31, 2009, 2008 and 2007

5 Relates to GMAB, GLWB and hybrid GMAB/GLWB embedded derivatives associated with contracts with living benefit riders. This balance also includes embedded derivatives associated with EIAs. Related derivatives are internally valued. The valuation of guaranteed minimum benefit embedded derivatives is based on capital market and actuarial assumptions, including risk margin considerations reflecting policyholder behavior. The Company uses both observable and unobservable inputs, such as published swap rates and historical volatilities as well as implied volatilities, in its capital market assumptions. Actuarial assumptions, including lapse behavior and mortality rates, are either based on annuity experience or pricing assumptions if experience has not yet developed.  

6 The value of separate account liabilities is set to equal the fair value of separate account assets.  

The following table summarizes financial instruments for which the Company used significant unobservable inputs (Level 3) to determine fair value measurements for the year ended December 31, 2008:

				Net investment gains (losses)																	Change in unrealized gains (losses) in earnings due to assets still held
(in millions)	Balance as of December 31, 2007			In earnings (realized and unrealized)1			In OCI (unrealized)2			Purchases, issuances, sales and settlements			Transfers in to Level 3		Transfers out of Level 3			Balance as of December 31, 2008
Assets
Investments:
Securities available-for-sale3:
U.S Treasury securities and obligations of U.S. government corporations and agencies	$	1.6		$	—		$	0.4		$	(0.1	)	$	—	$	—		$	1.9		$	—
Fixed maturity securities Corporate securities		1,515.7			(189.4	)		(250.3	)		(384.1	)		901.2		(265.8	)		1,327.3			—
Residential mortgage-backed securities		193.3			(402.8	)		(711.6	)		(290.5	)		4,290.4		(42.9	)		3,035.9			—
Commercial mortgage-backed securities		87.6			(12.8	)		(306.7	)		187.1			371.6		(63.4	)		263.4			—
Collateralized debt obligations		532.6			(281.1	)		(97.4	)		23.4			78.0		(5.1	)		250.4			—
Other asset-backed securities		122.3			(13.4	)		(39.9	)		(37.2	)		127.8		(47.8	)		111.8			—
Total fixed maturity securities		2,453.1			(899.5	)		(1,405.5	)		(501.4	)		5,769.0		(425.0	)		4,990.7			—
Equity securities		1.4			(54.9	)		(9.4	)		40.3			40.5		—			17.9			—
Total securities available-for-sale		2,454.5			(954.4	)		(1,414.9	)		(461.1	)		5,809.5		(425.0	)		5,008.6			—
Mortgage loans held for sale		86.1			(49.3	)		—			87.7			—		—			124.5			(49.3	)
Short-term investments		382.7			(0.2	)		—			(1.3	)		—		(381.2	)		—			—
Total investments		2,923.3			(1,003.9	)		(1,414.9	)		(374.7	)		5,809.5		(806.2	)		5,133.1			(49.3	)
Derivative assets		166.6			405.4			4.4			21.2			—		—		$	597.6			394.0
Separate account assets4,6		2,258.6			305.9			—			511.4			23.9		(958.0	)	$	2,141.8			329.7
Total assets	$	5,348.5		$	(292.6	)	$	(1,410.5	)	$	157.9		$	5,833.4	$	(1,764.2	)	$	7,872.5		$	674.4
Liabilities
Future policy benefits and claims5	$	(128.9	)	$	(1,602.1	)	$	—		$	(8.7	)	$	—	$	—		$	(1,739.7	)	$	(1,602.1	)
Derivative liabilities		(16.3	)		3.9			—			8.2			—		—		$	(4.2	)		12.0
Total liabilities	$	(145.2	)	$	(1,598.2	)	$	—		$	(0.5	)	$	—	$	—		$	(1,743.9	)	$	(1,590.1	)

1 Includes gains and losses on sales of financial instruments, changes in market value of certain instruments and other-than-temporary impairments. The net unrealized loss on separate account assets is attributable to contractholders and, therefore, is not included in the Company’s earnings.  

2 Includes changes in market value of certain instruments.  

NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES

(a wholly-owned subsidiary of Nationwide Financial Services, Inc.)

Notes to Consolidated Financial Statements, Continued

December 31, 2009, 2008 and 2007

3 Includes certain collateralized mortgage obligations, residential mortgage-backed securities, commercial mortgage-backed securities, other ABSs, certain broker or internally priced securities and securities that are at or near default based on ratings assigned by the NAIC (see Note 6 for a discussion of NAIC designations). Equity securities represent holdings in non-registered mutual funds with significant unobservable inputs.  

4 Comprised of non-registered mutual funds with significant unobservable and/or liquidity restrictions. The net unrealized investment loss on these non-registered mutual funds is attributable to contractholders and, therefore, is not included in the Company’s earnings.  

5 Relates to GMAB, GLWB and hybrid GMAB/GLWB embedded derivatives associated with contracts with living benefit riders. This balance also includes embedded derivatives associated with EIAs. Related derivatives are internally valued. The valuation of guaranteed minimum benefit embedded derivatives is based on capital market and actuarial assumptions, including risk margin considerations reflecting policyholder behavior. The Company uses both observable and unobservable inputs, such as published swap rates and historical volatilities as well as implied volatilities, in its capital market assumptions. Actuarial assumptions, including lapse behavior and mortality rates, are either based on annuity experience or pricing assumptions if experience has not yet developed.  

6 The value of separate account liabilities is set to equal the fair value of separate account assets.  

Transfers

The Company reviews its fair value hierarchy classifications quarterly. Changes in observability of significant valuation inputs identified during these reviews may trigger reclassification of fair value hierarchy levels of financial assets and liabilities. Reclassifications in/out of Level 3 are reported as transfers at the beginning of the period in which the change occurs. During 2008, the Company’s investments in residential mortgage-backed securities backed by prime collateral were classified as Level 3 financial assets because of their inactive markets and resulting illiquidity. As of December 31, 2009, these securities are no longer considered inactive due to increased trading volume and market activity and as a result were transferred out of Level 3. In addition, the Company was able to gain additional observable valuation inputs in the pricing of certain corporate securities, residential mortgage-backed securities and commercial mortgage-backed securities, which led to transferring these securities out of Level 3.

Additionally, certain corporate securities and commercial mortgage-backed securities had significant changes in key valuation inputs, which led to transfers into Level 3, primarily related to ratings downgrades and changes in pricing sources.

Fair Value on a Nonrecurring Basis

In 2009, certain mortgage loans on real estate held for investment were measured at the estimated fair value of the collateral on a non-recurring basis in periods subsequent to initial recognition due to these loans having specific reserves applied to them during the period. The application of these specific reserves adjusts the amortized cost basis of the loan to the estimated fair value of the collateral. The estimated fair value of the collateral supporting these loans was $154.8 million when the specific reserves were recorded.

Financial Instruments Not Carried at Fair Value

In estimating fair value for its disclosures for financial instruments not carried at fair value (and not included in the fair value disclosures above), the Company used the following methods and assumptions:

Mortgage loans on real estate held for investment, net: The fair values of mortgage loans held for investment on real estate are estimated using discounted cash flow analyses based on interest rates currently being offered for similar loans to borrowers with similar credit ratings. Loans with similar characteristics are aggregated for purposes of the calculations. As commercial mortgage loans held for sale are included in the above fair value disclosure, they are excluded from financial instruments not carried at fair value in the table below.

Policy loans: The carrying amount reported in the consolidated balance sheets approximates fair value.

NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES

(a wholly-owned subsidiary of Nationwide Financial Services, Inc.)

Notes to Consolidated Financial Statements, Continued

December 31, 2009, 2008 and 2007

Investment contracts: The fair values of the Company’s liabilities under investment type contracts are based on one of two methods. For investment contracts without defined maturities, fair value is the amount payable on demand, net of certain surrender charges. For investment contracts with known or determined maturities, fair value is estimated using discounted cash flow analysis. Interest rates used in this analysis are similar to currently offered contracts with maturities consistent with those remaining for the contracts being valued.

Short-term debt: The carrying amount reported in the consolidated balance sheets approximates fair value.

Long-term debt, payable to Nationwide Financial Services, Inc. (NFS): The fair values for long-term debt are based on estimated market prices.

The following table summarizes the carrying values and estimated fair values of financial instruments subject to disclosure requirements as of December 31:

	2009						2008
(in millions)	Carrying value			Estimated fair value			Carrying value			Estimated fair value
Assets
Investments:
Mortgage loans on real estate, net	$	6,781.1		$	5,946.3		$	7,645.6		$	6,845.6
Policy loans		1,050.4			1,050.4			1,095.6			1,095.6
Liabilities
Investment contracts		(18,723.8	)		(18,315.5	)		(20,093.2	)		(19,621.5	)
Short-term debt		(150.0	)		(150.0	)		(249.7	)		(249.7	)
Long-term debt, payable to NFS		(700.0	)		(716.6	)		(700.0	)		(568.7	)

(5) Derivative Financial Instruments  

Qualitative Disclosures

The Company recognizes all of its derivative instruments as either assets or liabilities at fair value. The accounting for changes in the fair value (e.g., gains or losses) of a derivative instrument depends on whether it has been designated and qualifies as part of a hedging relationship, and further, on the type of hedging relationship.

For derivative instruments that are designated and qualify as a cash flow hedge (e.g., hedging the exposure to variability in expected future cash flows that is attributable to interest rate risk), the effective portion of the gain or loss on the derivative instrument is reported as a component of AOCI and reclassified into earnings in the same line item associated with the forecasted transaction and in the same period or periods during which the hedged transaction impacts earnings (e.g., interest income on a floating rate asset). The remaining gain or loss on the derivative instrument in excess of the cumulative change in the present value of future cash flows of the hedged item, if any (ineffectiveness), or components of fair value that are excluded from the assessment of effectiveness, are recognized in the consolidated statements of income (loss) during the period.

For derivative instruments that are designated and qualify as a fair value hedge (e.g., hedging the exposure to changes in the fair value of an asset or a liability or an identified portion thereof that is attributable to a particular risk), the gain or loss on the derivative instrument as well as the hedged item are both recognized in net realized investment gains and losses.

NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES

(a wholly-owned subsidiary of Nationwide Financial Services, Inc.)

Notes to Consolidated Financial Statements, Continued

December 31, 2009, 2008 and 2007

For derivative instruments that are not designated as a hedging instrument, the gain or loss on the derivative instrument is recognized in net realized investment gains and losses.

The Company’s derivative activities primarily are with financial institutions and corporations. In order to minimize credit risk, the Company enters into master netting agreements, which reduce risk by permitting the closeout and netting of transactions with the same counterparty upon occurrence of certain events. In addition, the Company attempts to reduce credit risk by obtaining collateral from counterparties. The determination of the need for and the levels of collateral vary based on an assessment of the credit risk of the counterparty. Generally, the Company accepts collateral in the form of cash, U.S. Treasury securities and other marketable securities.

As of December 31, 2009 and 2008, the Company had received $532.4 million and $1.02 billion, respectively, of cash for derivative collateral, which is in turn invested in short-term investments. The Company also held $32.3 million and $35.4 million of securities as off-balance sheet collateral on derivative transactions as of December 31, 2009 and 2008, respectively. As of December 31, 2009 and 2008, the Company had pledged fixed maturity securities with a fair value of $55.6 million and $24.5 million, respectively, as collateral to various derivative counterparties. There are no contingent features associated with the Company’s derivative instruments which would require additional collateral to be pledged to counterparties.

The Company periodically evaluates the risks within the derivative portfolios due to credit exposure. When evaluating this risk, the Company considers several factors which include, but are not limited to, the counterparty risk associated with derivative receivables, the Company’s own credit as it relates to derivative payables, the collateral thresholds associated with each counterparty, and changes in relevant market data in order to gain insight into the probability of default by the counterparty. In addition, the effect that the Company’s exposure to credit risk could have on the effectiveness of the Company’s hedging relationships is considered. As of December 31, 2009, the impact of the exposure to credit risk on both the fair value measurement of derivative assets and liabilities and the effectiveness of the Company’s hedging relationships was immaterial.

The Company is exposed to certain other risks relating to its ongoing business operations. The primary risks managed by using derivative instruments are interest rate risk, foreign currency exchange risk, equity risk and credit risk.

Derivatives Qualifying for Hedge Accounting – Interest Rate Risk Management

The Company periodically purchases variable rate investments (e.g., commercial mortgage loans and corporate bonds). As a result, the Company is exposed to variability in cash flows and investment income due to changes in interest rates. Such variability poses risks to the Company when the investments are funded with fixed rate liabilities. In an effort to manage this risk, the Company may enter into receive fixed/pay variable interest rate swaps.

In using these interest rate swaps, the Company receives fixed interest rate payments and makes variable rate payments. The variable interest paid on the swap is intended to match the variable interest received on the investment, resulting in the Company receiving the fixed interest payments on the swap. The net receipt of a fixed rate will offset the fixed rate paid on the liability. These interest rate swaps are designated as hedging instruments in cash flow hedging relationships.

The Company periodically participates in a medium-term note (MTN) program. Under this program, NLIC issues funding agreements to an unconsolidated third party trust to secure notes issued to investors by the trust. The proceeds from these funding agreements are generally used to purchase fixed rate assets (generally available-for-sale corporate bonds, available-for-sale private placement bonds or held for investment commercial mortgage loans). In a rising interest rate environment, the Company is exposed to narrowing margins as interest expense will increase while interest income remains constant. To manage this risk, the Company has entered into pay fixed/receive variable interest rate swaps. The interest rate swap agreement utilized by the Company effectively modifies its exposure to interest rate risk by converting the Company’s floating rate funding agreements associated with the MTN program to a fixed rate, thus reducing the impact of interest rate changes on future interest expense. These interest rate swaps are designated as hedging instruments in cash flow hedging relationships.

NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES

(a wholly-owned subsidiary of Nationwide Financial Services, Inc.)

Notes to Consolidated Financial Statements, Continued

December 31, 2009, 2008 and 2007

Derivatives Qualifying for Hedge Accounting – Foreign Currency Risk Management

The Company purchases foreign-denominated fixed rate assets and the associated investment income is exposed to changes in the exchange rates of the foreign currencies. To manage this risk, the Company has entered into pay fixed foreign currency/receive fixed U.S. dollar cross-currency swaps. As foreign exchange rates change, the increase or decrease in the cash flows of the derivative instrument will offset the changes in the functional-currency equivalent cash flows of the asset. These cross-currency swaps are designated as hedging instruments in cash flow hedging relationships.

The Company also purchases foreign-denominated fixed rate assets, funded with proceeds from funding agreements under a variable rate MTNs. The value of these investments is exposed to both changes in the exchange rates of the foreign currencies and changes in interest rates. To manage this risk, the Company has entered into pay fixed foreign currency/receive variable U.S. cross-currency interest rate swaps. As foreign exchange rates and interest rates change, the increase or decrease in the value of the derivative instrument will offset the changes in the asset’s value (relative to foreign currency and interest rate changes). These cross-currency interest rate swaps are designated as hedging instruments in fair value hedging relationships.

In addition, the Company periodically participates in a fixed rate foreign denominated MTN program. Under this program, NLIC issues funding agreements to an unconsolidated third party trust to secure notes issued to investors by the trust, and the value of these liabilities is exposed to both changes in the exchange rates of the foreign currencies and changes in interest rates. To manage this risk, the Company has entered into receive fixed foreign currency/pay variable U.S. cross-currency interest rate swaps. As foreign exchange rates and interest rates change, the increase or decrease in the value of the derivative instrument will offset the changes in the liability’s value (relative to foreign currency and interest rate changes). These cross-currency interest rate swaps are designated as hedging instruments in fair value hedging relationships.

Derivatives Not Qualifying for Hedge Accounting – Interest Rate Risk Management

The Company enters into commercial mortgage loan commitments that are held for sale, which exposes the Company to changes in the fair value of such commitments due to changes in interest rates during the commitment period prior to the loans being funded. In an effort to manage this risk, the Company enters into short U.S. Treasury futures and/or pay fixed interest rate swaps during the commitment period. If interest rates rise or fall, the gains or losses on short U.S. Treasury futures will offset the change in fair value of the commitment attributable to the change in interest rates.

The Company may use pay fixed, receive variable interest rate swaps to hedge the value of a portfolio of fixed-rate assets, relative to changes in interest rates. The interest rate swaps mitigate the risk of a loss of value due to increasing interest rates, with the fluctuations in the fair values of the derivatives offsetting changes in the fair values of the portfolios resulting from changes in interest rates.

The Company offers a variety of variable annuity programs with a guaranteed minimum balance or guaranteed withdrawal benefits, and options are utilized to economically hedge a portion of these products. See Derivatives Not Qualifying for Hedge Accounting – Equity Market Risk Management below for further explanation. As interest rates are a component of the option’s value, the effectiveness of economically hedging the annuity products may be adversely affected by changes in interest rates. The Company enters into interest rate swaps to mitigate this risk. The fluctuation in the fair values of the derivatives offsets the changes in the fair values of the options resulting from changes in interest rates.

The Company periodically enters into basis swaps (receive one variable rate/pay another variable rate) to better match the cash flows received from the specific variable-rate investments with the variable rate paid on a group of liabilities. While the pay-side terms of the basis swap will be consistent with the terms of the asset, the Company is not able to match the receive-side terms of the derivative to a specific liability. Therefore, basis swaps do not receive hedge accounting treatment.

In addition, the Company may use pay fixed/receive variable interest rate swaps as hedges against the negative effects of adverse interest rate movements.

NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES

(a wholly-owned subsidiary of Nationwide Financial Services, Inc.)

Notes to Consolidated Financial Statements, Continued

December 31, 2009, 2008 and 2007

Derivatives Not Qualifying for Hedge Accounting – Foreign Currency Risk Management

The Company periodically participates in a variable rate foreign denominated MTN program. Under this program, NLIC issues funding agreements to an unconsolidated third party trust to secure notes issued to investors by the trust. As such, the cash flows related to these MTNs are exposed to changes in the exchange rates of the foreign currencies. Because the Company desires to retain the variable interest rate, it has entered into receive variable foreign currency/pay variable U.S. dollar cross-currency swaps. The basis swap converts the debt instrument to a U.S. dollar variable rate, thereby eliminating foreign exchange risk. While the receive-side terms of the basis swap will be consistent with the terms of the liability, the Company is not able to match the pay-side terms of the derivative to a specific asset. Therefore, these basis swaps do not receive hedge accounting treatment. The Company also uses currency contracts, primarily futures, to hedge foreign currency denominated investments in certain alternative investments.

Derivatives Not Qualifying for Hedge Accounting – Equity Market Risk Management

The Company offers a variety of variable annuity programs with a guaranteed minimum balance or guaranteed withdrawal benefits. The contractholders may elect to invest in equity funds. Adverse changes in the equity markets expose the Company to losses if the changes result in contractholder’s account balances falling below the guaranteed minimum. To mitigate a portion of the risk associated with these liabilities, the Company enters into equity index futures and options. The changes in value of the futures and options will offset a portion of the changes in the annuity accounts relative to changes in the equity market.

The Company offers a variety of variable annuity programs with a guaranteed minimum balance or guaranteed withdrawal benefits, where the contractholder elects to invest in funds with a foreign equity index. Adverse changes in the foreign equity index expose the Company to losses if the change results in contractholder’s account balances falling below the guaranteed minimum. To mitigate this risk, the Company enters into total return swaps, where the Company pays the total return on the foreign index and receives one-month U.S. London Interbank Offered Rate (LIBOR). The changes in cash flows of the total return swap will offset a portion of the changes in the annuity accounts relative to changes in the foreign index.

The Company’s living benefit riders represent an embedded derivative in a variable annuity contract that is required to be separated from, and valued apart from, the host variable annuity contract. The embedded derivatives are carried at fair value. Subsequent changes in the fair value of the embedded derivatives are recognized in earnings as a component of net realized investment gains and losses. The fair value of the embedded derivatives is calculated based on a combination of capital market and actuarial assumptions. Projections of cash flows inherent in the valuation of the embedded derivative incorporate numerous assumptions including, but not limited to, expectations of contractholder persistency, contractholder withdrawal patterns, risk neutral market returns, correlations of market returns and market return volatility. The Company does not expect any meaningful level of claims under the living benefit features for several years and believes the impact of claims is expected to be mitigated by its economic hedging program.

Derivatives Not Qualifying for Hedge Accounting – Credit Risk

The Company enters into two distinct types of credit derivative contracts (or credit default swaps) which allows the Company to either sell or buy credit protection on a specific creditor or credit index.

The Company sells credit default protection to counterparties on selected debt instruments with specific creditor or credit index exposure and combines the credit default swap with selected assets the Company owns to enhance spreads. These selected assets may have sufficient duration for the related liability, but do not earn a sufficient credit spread. When the Company sells these instruments, it receives periodic premium payments similar to the risk premium received on an equivalent maturity bond from the same creditor. In return, the Company agrees to provide for losses if a credit event occurs during the lifetime of the contract, by buying a pre-determined cash bond from the counterparty at face value. In such a contract, a credit event will be defined in the trade settlement documentation and may include, but is not limited to, creditor bankruptcy or restructuring. The combined credit default swap and investments provide cash flows with the duration and credit spread targeted by the Company.

NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES

(a wholly-owned subsidiary of Nationwide Financial Services, Inc.)

Notes to Consolidated Financial Statements, Continued

December 31, 2009, 2008 and 2007

The Company also has purchased credit default protection on selected debt instruments exposed to short-term credit concerns, or because the combination of the corporate bond and purchased default protection provides sufficient spread and duration targeted by the Company.

Quantitative Disclosure

The following table presents the fair value of derivative instruments, location of the related instruments in the consolidated balance sheets and the related notional amounts of the derivative instruments as of December 31, 2009:

	Derivative assets					Derivative liabilities
(in millions)	Balance sheet location	Fair value		Notional		Balance sheet location	Fair value		Notional
Derivatives designated as hedging instruments:
Interest rate contracts	Other assets	$	3.8	$	86.4	Other liabilities	$	69.0	$	1,216.1
Cross-currency swaps	Other assets		33.8		93.1	Other liabilities		35.9		215.9
Total derivatives designated as hedging instruments			37.6		179.5			104.9		1,432.0
Derivatives not designated as hedging instruments:
Interest rate contracts	Other assets		410.0		7,456.7	Other liabilities		239.1		5,162.0
Cross-currency swaps	Other assets		48.6		210.8	Other liabilities		48.5		209.6
Credit default swaps	Other assets		0.5		28.5	Other liabilities		3.2		81.5
Total return swaps	Other assets		0.8		85.4	Other liabilities		8.3		555.8
Equity contracts	Other assets		331.2		2,504.6	Other liabilities		10.3		995.7
Embedded derivatives on guaranteed benefit annuity programs	N/A		—		—	Future policy benefits and claims		310.9		N/A
Other embedded derivatives	N/A		—		—	Other liabilities		1.5		N/A
Total derivatives not designated as hedging instruments			791.1		10,286.0			621.8		7,004.6
Total derivatives		$	828.7	$	10,465.5		$	726.7	$	8,436.6

NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES

(a wholly-owned subsidiary of Nationwide Financial Services, Inc.)

Notes to Consolidated Financial Statements, Continued

December 31, 2009, 2008 and 2007

The following table presents the gains (losses) for derivative instruments designated and qualifying as hedging instruments in fair value hedges and the location of these instruments in the consolidated financial statements for the year ended December 31, 2009:

(in millions)	Location of gain (loss) recognized on derivatives	Amount of gain (loss) recognized on derivatives1,2
Derivatives in fair value hedging relationships:
Interest rate contracts	Net realized investment gains (losses)	$	24.9
Cross-currency swaps	Net realized investment gains (losses)		(2.4	)
Total		$	22.5
Underlying fair value hedge relationships:
Interest rate contracts	Net realized investment gains (losses)	$	(35.3	)
Cross-currency swaps	Net realized investment gains (losses)		2.5
Total		$	(32.8	)
1         Excludes ($36.9) million of periodic settlements in interest rate contracts which are recorded in net investment income. 2        Includes $7.5 million of cash received in the termination of cash flow hedging instruments.

NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES

(a wholly-owned subsidiary of Nationwide Financial Services, Inc.)

Notes to Consolidated Financial Statements, Continued

December 31, 2009, 2008 and 2007

The following tables present the gains (losses) for derivative instruments designated and qualifying as hedging instruments in cash flow hedges and the location of these instruments in the consolidated financial statements for the year ended December 31, 2009:

(in millions)	Amount of gain (loss) recognized in OCI on derivatives
Derivatives in cash flow hedging relationships:
Interest rate contracts	$	12.6
Cross-currency swaps		(4.4	)
Currency contracts		(18.8	)
Other embedded derivatives		(12.0	)
Total	$	(22.6	)

(in millions)	Location of realized gain (loss) reclassified from AOCI into income1	Amount of realized gain (loss) reclassified from AOCI into income
Derivatives in cash flow hedging relationships:
Interest rate contracts	Interest credited to policyholder accounts	$	(3.8	)
Cross-currency swaps	Net realized investment gains (losses)		(10.9	)
Currency contracts	Net realized investment gains (losses)		(3.8	)
Other embedded derivatives	N/A		—
Total		$	(18.5	)

1 Effective portion.  

(in millions)	Location of realized gain (loss) recognized in income on derivatives1	Amount of realized gain (loss) recognized in income on derivatives1,2,3
Derivatives in cash flow hedging relationships:
Interest rate contracts	Net realized investment gains (losses)	$	0.1
Cross-currency swaps	Net realized investment gains (losses)		(1.3	)
Currency contracts	Net realized investment gains (losses)		(2.8	)
Other embedded derivatives	N/A		—
Total		$	(4.0	)

1 Ineffective portion and amounts excluded from the measurement of ineffectiveness.  

2 Excludes 0.2 million of periodic settlements in interest rate contracts.  

3 Includes $16.5 million of cash received in termination of cash flow hedging instrument.  

NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES

(a wholly-owned subsidiary of Nationwide Financial Services, Inc.)

Notes to Consolidated Financial Statements, Continued

December 31, 2009, 2008 and 2007

The following table presents the gains (losses) for derivative instruments not designated and qualifying as hedging instruments and the location of these instruments in the consolidated financial statements for the year ended December 31, 2009:

(in millions)	Location of realized gain (loss) in income on derivatives	Amount of realized gain (loss) recognized in income on derivatives1
Derivatives not designated as hedging instruments:
Interest rate contracts	Net realized investment gains (losses)	$	(197.2	)
Cross-currency swaps	Net realized investment gains (losses)		3.3
Credit default swaps	Net realized investment gains (losses)		7.9
Equity total return swaps	Net realized investment gains (losses)		7.0
Equity contracts	Net realized investment gains (losses)		(738.7	)
Embedded derivatives on guaranteed benefit annuity programs	Net realized investment gains (losses)		1,432.0
Other embedded derivatives	Net realized investment gains (losses)		2.6
Total		$	516.9
1         Excludes net interest settlements and other revenue on embedded derivatives on guaranteed benefit annuity programs that are also recorded in net realized investment gains (losses).

In addition to the net realized investment gains (losses) listed in the previous tables, $(151.3) million of net interest settlements on all derivative instruments and $63.2 million of other revenue on embedded derivatives on guaranteed benefit annuity programs are also recorded in net realized investment gains (losses) for the year ended December 31, 2009.

NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES

(a wholly-owned subsidiary of Nationwide Financial Services, Inc.)

Notes to Consolidated Financial Statements, Continued

December 31, 2009, 2008 and 2007

Credit Derivatives

The Company had exposure to credit protection contracts for the years ended December 31, 2009, 2008, and 2007 and had experienced no credit event losses in 2009, credit event losses of $18.8 million in 2008 and no credit event losses in 2007 on such contracts. The following table presents the Company’s outstanding exposure to credit protection contracts, all of which are related to corporate debt instruments, as of the dates indicated, by contract maturity and industry exposure:

	Less than or equal to one year					One to three years					Three to five years					Total
(in millions)	Maximum potential risk		Estimated fair value			Maximum potential risk		Estimated fair value			Maximum potential risk		Estimated fair value			Maximum potential risk		Estimated fair value
December 31, 2009:
Single sector exposure:
Consumer goods	$	—	$	—		$	—	$	—		$	—	$	—		$	—	$	—
Financial		35.0		(2.5	)		9.0		0.2			—		—			44.0		(2.3	)
Oil & gas pipelines		15.0		—			—		—			—		—			15.0		—
Services		—		—			—		—			10.0		0.2			10.0		0.2
Utilities		—		—			—		—			—		—			—		—
Total single sector exposure		50.0		(2.5	)		9.0		0.2			10.0		0.2			69.0		(2.1	)
Index exposure:
Corporate bonds		—		—			—		—			—		—			—		—
Total index exposure		—		—			—		—			—		—			—		—
Total	$	50.0	$	(2.5	)	$	9.0	$	0.2		$	10.0	$	0.2		$	69.0	$	(2.1	)
December 31, 2008:
Single sector exposure:
Consumer goods	$	—	$	—		$	6.0	$	(0.8	)	$	—	$	—		$	6.0	$	(0.8	)
Financial		—		—			35.0		(5.8	)		13.0		(0.5	)		48.0		(6.3	)
Oil & gas pipelines		10.0		—			15.0		(0.8	)		—		—			25.0		(0.8	)
Services		—		—			—		—			35.0		(3.0	)		35.0		(3.0	)
Utilities		4.5		—			—		—			—		—			4.5		—
Total single sector exposure		14.5		—			56.0		(7.4	)		48.0		(3.5	)		118.5		(10.9	)
Index exposure:
Corporate bonds		—		—			—		—			110.9		(0.3	)		110.9		(0.3	)
Total index exposure		—		—			—		—			110.9		(0.3	)		110.9		(0.3	)
Total	$	14.5	$	—		$	56.0	$	(7.4	)	$	158.9	$	(3.8	)	$	229.4	$	(11.2	)

NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES

(a wholly-owned subsidiary of Nationwide Financial Services, Inc.)

Notes to Consolidated Financial Statements, Continued

December 31, 2009, 2008 and 2007

(6) Investments  

Fixed Maturity Securities and Equity Securities Available-for-Sale

The following table summarizes the amortized cost, gross unrealized gains and losses, and estimated fair values of securities available-for-sale as of the dates indicated:

(in millions)	Amortized cost		Gross unrealized gains		Gross unrealized losses		Estimated fair value
December 31, 2009:
Fixed maturity securities:
U.S. Treasury securities and obligations of U.S. Government corporations	$	136.7	$	15.4	$	1.0	$	151.1
U. S. Government agencies		551.3		57.2		5.7		602.8
Obligations of states and political subdivisions		567.6		4.4		23.1		548.9
Debt securities issued by foreign governments		69.9		5.3		0.1		75.1
Corporate securities
Public		10,929.8		597.2		175.2		11,351.8
Private		4,499.5		193.1		83.4		4,609.2
Residential mortgage-backed securities		6,078.9		95.2		665.2		5,508.9
Commercial mortgage-backed securities		1,284.9		6.5		207.3		1,084.1
Collateralized debt obligations		531.1		11.8		170.9		372.0
Other asset-backed securities		453.4		20.4		28.0		445.8
Total fixed maturity securities		25,103.1		1,006.5		1,359.9		24,749.7
Equity securities		48.8		4.6		0.8		52.6
Total securities available-for-sale	$	25,151.9	$	1,011.1	$	1,360.7	$	24,802.3
December 31, 2008:
Fixed maturity securities:
U.S. Treasury securities and obligations of U.S. Government corporations	$	79.1	$	22.6	$	—	$	101.7
U. S. Government agencies		420.4		93.3		—		513.7
Obligations of states and political subdivisions		230.5		1.6		7.4		224.7
Debt securities issued by foreign governments		50.1		5.4		—		55.5
Corporate securities
Public		8,881.9		109.9		1,040.7		7,951.1
Private		4,997.8		45.2		401.0		4,642.0
Residential mortgage-backed securities		6,807.8		90.5		863.6		6,034.7
Commercial mortgage-backed securities		1,418.1		0.6		455.3		963.4
Collateralized debt obligations		557.8		6.3		240.7		323.4
Other asset-backed securities		679.1		3.6		105.4		577.3
Total fixed maturity securities		24,122.6		379.0		3,114.1		21,387.5
Equity securities		62.2		0.7		8.8		54.1
Total securities available-for-sale	$	24,184.8	$	379.7	$	3,122.9	$	21,441.6

NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES

(a wholly-owned subsidiary of Nationwide Financial Services, Inc.)

Notes to Consolidated Financial Statements, Continued

December 31, 2009, 2008 and 2007

The market value of the Company’s general account investments may fluctuate significantly in response to changes in interest rates, investment quality ratings and credit spreads. The Company does not have the intent to sell, nor is it more likely than not that the Company will be required to sell debt securities in unrealized loss positions. The Company may realize investment losses to the extent its liquidity needs require the disposition of general account fixed maturity securities in unfavorable interest rate, liquidity or credit spread environments.

For securities available-for-sale as of the dates indicated, the following table summarizes the Company’s gross unrealized losses based on the amount of time each type of security has been in an unrealized loss position:

	Less than or equal to one year					More than one year					Total
(in millions, except number of securities)	Estimated fair value		Gross unrealized losses		Number of securities	Estimated fair value		Gross unrealized losses		Number of securities	Estimated fair value		Gross unrealized losses		Number of securities
December 31, 2009:
Fixed maturity securities:
U.S. Treasury securities and obligations of U.S. Government corporations	$	50.9	$	1.0	2	$	—	$	—	—	$	50.9	$	1.0	2
U.S. Government agencies		154.6		5.7	8		—		—	—		154.6		5.7	8
Obligations of states and political subdivisions		318.2		11.5	35		79.1		11.6	13		397.3		23.1	48
Debt securities issued by foreign governments		1.6		0.1	2		—		—	—		1.6		0.1	2
Corporate securities
Public		1,197.9		32.0	160		1,117.5		143.2	201		2,315.4		175.2	361
Private		278.8		19.0	47		972.6		64.4	73		1,251.4		83.4	120
Residential mortgage-backed securities		936.7		104.2	117		2,375.1		561.0	341		3,311.8		665.2	458
Commercial mortgage-backed securities		42.7		5.2	11		699.3		202.1	101		742.0		207.3	112
Collateralized debt obligations		29.9		28.9	13		277.2		142.0	45		307.1		170.9	58
Other asset-backed securities		5.4		0.2	12		247.5		27.8	33		252.9		28.0	45
Total fixed maturity securities		3,016.7		207.8	407		5,768.3		1,152.1	807		8,785.0		1,359.9	1,214
Equity securities		16.7		0.1	13		2.4		0.7	75		19.1		0.8	88
Total	$	3,033.4	$	207.9	420	$	5,770.7	$	1,152.8	882	$	8,804.1	$	1,360.7	1,302
December 31, 2008:
Fixed maturity securities:
Obligations of states and political subdivisions	$	94.9	$	3.5	16	$	29.3	$	3.9	9	$	124.2	$	7.4	25
Corporate securities
Public		4,109.4		676.9	692		1,350.3		363.8	289		5,459.7		1,040.7	981
Private		2,259.4		282.1	231		996.5		118.9	105		3,255.9		401.0	336
Residential mortgage-backed securities		820.3		187.8	138		2,281.4		675.8	323		3,101.7		863.6	461
Commercial mortgage-backed securities		539.9		190.4	96		410.9		264.9	96		950.8		455.3	192
Collateralized debt obligations		151.0		100.8	24		122.6		139.9	36		273.6		240.7	60
Other asset-backed securities		325.5		41.7	38		228.7		63.7	26		554.2		105.4	64
Total fixed maturity securities		8,300.4		1,483.2	1,235		5,419.7		1,630.9	884	$	13,720.1	$	3,114.1	2,119
Equity securities		19.2		8.6	81		3.4		0.2	6		22.6		8.8	87
Total	$	8,319.6	$	1,491.8	1,316	$	5,423.1	$	1,631.1	890	$	13,742.7	$	3,122.9	2,206

NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES

(a wholly-owned subsidiary of Nationwide Financial Services, Inc.)

Notes to Consolidated Financial Statements, Continued

December 31, 2009, 2008 and 2007

The weighted estimated fair value to amortized cost for non-investment grade fixed maturity securities that have an estimated fair value of less than 80% and have been in an unrealized loss position for more than one year was 65% and 64% as of December 31, 2009 and December 31, 2008, respectively.

The table below summarizes the amortized cost and estimated fair values of fixed maturity securities available-for-sale, by maturity, as of December 31, 2009. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

(in millions)	Amortized cost		Estimated fair value
Fixed maturity securities available-for-sale:
Due in one year or less	$	1,002.3	$	1,024.5
Due after one year through five years		7,213.2		7,507.1
Due after five years through ten years		5,265.4		5,516.8
Due after ten years		3,273.9		3,290.5
Subtotal		16,754.8		17,338.9
Residential mortgage-backed securities		6,078.9		5,508.9
Commercial mortgage-backed securities		1,284.9		1,084.1
Collateralized debt obligations		531.1		372.0
Other asset-backed securities		453.4		445.8
Total	$	25,103.1	$	24,749.7

The NAIC assigns credit quality ratings (NAIC designations) to securities for the purpose of statutory reporting. These NAIC designations are generally based on the credit ratings assigned by nationally recognized statistical rating agencies organizations (NRSRO) unless a security is not rated by an NRSRO, in which case the NAIC rates it using an alternative approach. For 2009 statutory reporting, the NAIC modified its ratings approach for residential mortgage-backed securities, which are not backed by U.S. government agencies. Under the modified approach, the NAIC designation for this type of security is based on an insurer’s reported carrying value for the security relative to a NAIC-prescribed ratings matrix for the security, with a higher NAIC designation afforded securities with lower carrying values. In effect, this process rates the credit quality of a security based on an independent market view of the expected discounted future cash flows from the security versus its statutory carrying value. Under this process, NAIC designations for these residential mortgage-backed securities could be higher or lower than the related NRSRO ratings. NAIC designations range from class 1 (highest quality) to class 6 (lowest quality). Of the Company’s general account fixed maturity securities, 91% and 93% were in the two highest NAIC designations categories as of December 31, 2009 and 2008, respectively.

NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES

(a wholly-owned subsidiary of Nationwide Financial Services, Inc.)

Notes to Consolidated Financial Statements, Continued

December 31, 2009, 2008 and 2007

The following table shows the equivalent designation between the NAIC and NRSRO and summarizes the credit quality, as determined by NAIC designations, of the Company’s fixed maturity securities portfolio as of the dates indicated:

(in millions)		December 31, 2009				December 31, 2008
NAIC Desingations1,2	NRSRO equivalent designation	Amortized cost		Estimated fair value		Amortized cost		Estimated fair value
1	AAA/AA/A	$	15,322.9	$	15,195.7	$	15,423.0	$	13,960.4
2	BBB		7,139.5		7,275.0		6,610.4		5,802.2
3	BB		1,551.1		1,404.3		1,233.3		990.0
4	B		724.1		616.7		556.0		386.2
5	CCC and lower		253.5		187.6		190.5		148.2
6	In or near default		112.0		70.4		109.4		100.5
	Total	$	25,103.1	$	24,749.7	$	24,122.6	$	21,387.5

1 NAIC designations are assigned at least annually. Some ratings for securities shown have been assigned to securities not yet assigned an NAIC designation in a manner approximating equivalent NRSRO categories.  

2 Class 1 and class 2 NAIC designations are generally considered to represent investment grade ratings and are considered as such by the Company in reporting its credit quality information.  

Other-Than-Temporary Impairment Evaluations

When evaluating whether a residential mortgage-backed security, commercial mortgage-backed security, collateralized debt obligation and other asset-backed securities are other-than-temporarily impaired, the Company examines characteristics of the underlying collateral, such as delinquency prepayment and default rates, the quality of the underlying borrower, the type of collateral in the pool, the vintage year of the collateral, subordination levels within the structure of the collateral pool, the quality of any credit guarantors, the Company’s intent to sell the security and whether it is more likely than not it will be required to sell the security before the recovery of its amortized cost basis.

In assessing corporate debt securities for other-than-temporary impairment, the Company evaluates the ability of the issuer to meet its debt obligations, the value of the company or specific collateral securing the debt position, the Company’s intent to sell the security and whether it is more likely than not it will be required to sell the security before the recovery of its amortized cost basis. A similar analysis is performed to evaluate U.S. Treasury securities and obligations of U.S. Government corporations, U.S. Government agencies, obligations of states and political subdivisions, and debt securities issued by foreign governments.

For all debt securities evaluated for other-than-temporary impairment (for which the Company does not have the intent to sell and it is not more likely than not that it will be required to sell the security before the recovery of its amortized cost basis), the Company considers the timing and amount of the cash flows. The Company evaluates its intent to sell on an individual security basis.

To the extent that the present value of the cash flows generated by a security is less than the amortized cost, an other-than-temporary impairment is recognized through earnings. It is reasonably possible that further declines in estimated fair values of such investments, or changes in assumptions or estimates of anticipated recoveries and/or cash flows, may cause further other-than-temporary impairments in the near term, which could be significant.

Equity securities may experience other-than-temporary impairment in the future based on the prospects for full recovery in value in a reasonable period of time and the Company’s ability and intent to hold the security to recovery.

NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES

(a wholly-owned subsidiary of Nationwide Financial Services, Inc.)

Notes to Consolidated Financial Statements, Continued

December 31, 2009, 2008 and 2007

Under the current other-than temporary impairment model, which was amended by the FASB and adopted by the Company in the first quarter of 2009, debt securities that become other-than-temporarily impaired (where the Company does not intend to sell the security and it is not more likely than not that it will be required to sell the security prior to recovery of the security’s amortized cost) are bifurcated with the credit portion of the impairment loss being recognized in earnings and the non-credit loss portion of the impairment being recognized in a separate component of other comprehensive income, net of applicable taxes and other offsets. For securities that are other-than-temporarily impaired, a discussion of the estimate of the credit loss portion that is recognized in earnings is provided, as applicable in the respective section of this footnote.

Corporate Securities

Corporate securities include conventional bonds, private placement fixed maturity securities, syndicated corporate bank loans and hybrid securities with both debt and equity-like features. For these corporate securities, the following table summarizes, as of the dates indicated, the Company’s gross unrealized loss position categorized as investment grade vs. non-investment grade, for the period of time indicated, and based on the ratio of estimated fair value to amortized cost (in millions):

	Period of time for which unrealized loss has existed
	Investment Grade						Non-Investment Grade						Total
Ratio of estimated fair value to amortized cost	Less than or equal to one year		More than one year		Total		Less than or equal to one year		More than one year		Total		Less than or equal to one year		More than one year		Total
December 31, 2009:
99.9% - 80.0%	$	27.1	$	104.1	$	131.2	$	13.1	$	45.5	$	58.6	$	40.2	$	149.6	$	189.8
79.9% - 50.0%		8.5		45.6		54.1		2.3		12.4		14.7		10.8		58.0		68.8
Below 50.0%		—		—		—		—		—		—		—		—		—
Total	$	35.6	$	149.7	$	185.3	$	15.4	$	57.9	$	73.3	$	51.0	$	207.6	$	258.6
December 31, 2008:
99.9% - 80.0%	$	355.7	$	116.8	$	472.5	$	31.0	$	23.4	$	54.4	$	386.7	$	140.2	$	526.9
79.9% - 50.0%		327.5		121.9		449.4		118.4		126.0		244.4		445.9		247.9		693.8
Below 50.0%		79.3		41.5		120.8		47.1		53.1		100.2		126.4		94.6		221.0
Total	$	762.5	$	280.2	$	1,042.7	$	196.5	$	202.5	$	399.0	$	959.0	$	482.7	$	1,441.7

Judgments regarding whether a corporate debt security is other-than-temporarily impaired include analyzing the issuer’s financial condition. An analysis of the issuer’s financial condition includes whether there has been a decline in the overall value of the issuer or its ability to service the specific security. The total enterprise value of the company issuing the security is determined through asset coverage, cash flow multiples, or other industry standards. Several factors assessed when determining the enterprise value include, but are not limited to, credit quality ratings, cash flow sustainability, liquidity, strength, industry, and market position. Sources of information include, but are not limited to, management projections, independent consultants, street research, peer analysis, and internal analysis.

If the company has concerns regarding the viability of the issuer or its ability to service the specific security after this analysis, a recovery value analysis is prepared to determine if the recovery value has declined below the amortized cost of the security. The recovery value is combined with the estimated timing to recovery, any other applicable cash flows that are expected and the security’s effective yield to arrive at the expected present value of cash flows. If a recovery estimate is not feasible, then the market’s view of cash flows implied by the current fair value, market discount rates, and effective yield are the primary factors used to estimate recovery.

NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES

(a wholly-owned subsidiary of Nationwide Financial Services, Inc.)

Notes to Consolidated Financial Statements, Continued

December 31, 2009, 2008 and 2007

The Company held hybrid securities issued by institutions in the financial sector with both debt and equity-like features, classified as corporate fixed maturity securities, with estimated fair values of $608.9 million and $661.2 million, and gross unrealized losses of $101.3 million and $379.9 million, as of December 31, 2009 and 2008, respectively. Of these unrealized losses as of December 31, 2009, $98.8 million, or 98%, were in an unrealized loss position for more than one year, evaluated under the debt model, compared to $106.3 million, or 18%, as of December 31, 2008. The Company evaluates such securities for other-than-temporary impairment using the criteria of either a debt or an equity security depending on the facts and circumstances of the individual issuer and security.

The Company invests in private placement fixed maturity securities because of the generally higher nominal yield available compared to comparably rated public fixed maturity securities, more restrictive financial and business covenants available in private fixed maturity security loan agreements, and stronger prepayment protection. Although private placement fixed maturity securities are not registered with the SEC and generally are less liquid than public fixed maturity securities, restrictive financial and business covenants included in private placement fixed maturity security loan agreements generally are designed to compensate for the impact of increased liquidity risk. A significant portion of the private placement fixed maturity securities that the Company holds are participations in issues that are also owned by other investors. In addition, some of these securities are rated by NRSROs, and substantially all have been assigned a rating by the NAIC, as shown in a previous table in this footnote summarizing the credit quality of the Company’s fixed maturity securities portfolio.

Residential Mortgage-Backed Securities

Residential mortgage-backed securities are a type of fixed income security backed by residential mortgage loans, which have been are sold into a trust or special purpose entity, formed for the purpose of securitizing and tranching the cash flows of the mortgage loans. The following tables summarize the distribution by collateral classification of the Company’s residential mortgage-backed securities as of dates indicated:

	As of December 31, 2009					As of December 31, 2008
in millions	Amortized cost		Estimated fair value		% of estimated fair value total	Amortized cost		Estimated fair value		% of estimated fair value total
Government agency	$	2,546.9	$	2,620.9	48%	$	2,928.5	$	3,002.4	50%
Prime		1,120.3		959.7	17%		1,341.6		1,041.4	17%
Alt-A		1,830.6		1,451.7	26%		1,850.7		1,451.6	24%
Sub-prime		577.3		473.7	9%		675.8		528.7	9%
Other residential mortgage collateral		3.8		2.9	—		11.2		10.6	—
Total	$	6,078.9	$	5,508.9	100%	$	6,807.8	$	6,034.7	100%

The Company considers Alt-A collateral to be mortgages whose underwriting standards do not qualify the mortgage for regular conforming or jumbo loan programs. Typical underwriting characteristics that cause a mortgage to fall into the Alt-A classification may include, but are not limited to, inadequate loan documentation of a borrower’s financial information, debt-to-income ratios above normal lending limits, loan-to-value ratios above normal lending limits that do not have primary mortgage insurance, a borrower who is a temporary resident, and loans securing non-conforming types of real estate. Alt-A mortgages are generally issued to borrowers having higher Fair Isaac Credit Organization (FICO) scores, and the lender typically charges a slightly higher interest rate for such mortgages.

The Company considers sub-prime collateral to be mortgages that are first or second lien mortgage loans issued to sub-prime borrowers, as demonstrated by recent delinquent rent or housing payments or substandard FICO scores. Second-lien mortgage loans are also considered sub-prime. The Company considers prime collateral to be mortgages whose underwriting standards qualify the mortgage for regular conforming or jumbo loan programs. In addition, government agency collateral is considered to be mortgages securitized by government agencies both implicitly and explicitly backed by the full faith and credit of the U.S. Government.

NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES

(a wholly-owned subsidiary of Nationwide Financial Services, Inc.)

Notes to Consolidated Financial Statements, Continued

December 31, 2009, 2008 and 2007

For residential mortgage-backed securities, the following table summarizes as of the dates indicated the Company’s gross unrealized loss position categorized as investment grade vs. non-investment grade, for the period of time indicated, and based on the ratio of estimated fair value to amortized cost (in millions):

	Period of time for which unrealized loss has existed
	Investment Grade						Non-Investment Grade						Total
Ratio of estimated fair value to amortized cost	Less than or equal to one year		More than one year		Total		Less than or equal to one year		More than one year		Total		Less than or equal to one year		More than one year		Total
December 31, 2009:
99.9% - 80.0%	$	29.0	$	134.1	$	163.1	$	11.5	$	41.5	$	53.0	$	40.5	$	175.6	$	216.1
79.9% - 50.0%		17.4		197.6		215.0		19.5		140.4		159.9		36.9		338.0		374.9
Below 50.0%		10.3		33.8		44.1		16.5		13.6		30.1		26.8		47.4		74.2
Total	$	56.7	$	365.5	$	422.2	$	47.5	$	195.5	$	243.0	$	104.2	$	561.0	$	665.2
December 31, 2008:
99.9% - 80.0%	$	47.7	$	124.5	$	172.2	$	6.0	$	10.3	$	16.3	$	53.7	$	134.8	$	188.5
79.9% - 50.0%		91.7		441.6		533.3		17.1		22.2		39.3		108.8		463.8		572.6
Below 50.0%		13.0		74.4		87.4		12.3		2.8		15.1		25.3		77.2		102.5
Total	$	152.4	$	640.5	$	792.9	$	35.4	$	35.3	$	70.7	$	187.8	$	675.8	$	863.6

The Company evaluates its residential mortgage-backed securities for other-than-temporary impairment using multiple inputs. Loan level defaults are estimated using an option pricing approach in which the probability of borrower default increases as home equity declines. Other factors which influence the probability of default are debt-servicing, missed refinancing opportunities and geography. Loan level characteristics such as issuer, FICO score, payment terms, level of documentation, residency type, dwelling type and loan purpose are also utilized in the model along with historical performance, to estimate or measure the loan’s propensity to default. Additionally, the model takes into account loan age, seasonality, payment changes and exposure to refinancing as additional drivers of default. For transactions where loan level data is not available, the model uses a proxy based on the collateral characteristics. Loss severity in the model is a function of multiple factors, including but not limited to, the unpaid balance, interest rate, mortgage insurance ratios, assessed property value at origination, change in property valuation and loan-to-value ratio at origination. Prepayment speeds, both actual and estimated, are also considered. The cash flows generated by the collateral securing these securities are then determined based on these default, loss severity and prepayment assumptions. These collateral cash flows are then utilized, along with consideration for the issue’s position in the overall structure, to determine the cash flows associated with the residential mortgage-backed security held by the Company.

NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES

(a wholly-owned subsidiary of Nationwide Financial Services, Inc.)

Notes to Consolidated Financial Statements, Continued

December 31, 2009, 2008 and 2007

Commercial Mortgage-Backed Securities

The Company owns and manages commercial mortgage-backed securities, which are trust certificates or bonds offered to investors that are collateralized by a pool of commercial mortgage loans from which the principal and interest paid on those mortgages flows to investors. These investments in commercial mortgage-backed securities are generally characterized by securities that are collateralized by static, heterogeneous pools of mortgages on commercial real estate properties. Deals are generally diversified across property types, geography, borrowers, tenants, loan size, coupon and vintages. For commercial mortgage-backed securities, the following tables summarize, as of the dates indicated, the Company’s gross unrealized loss position categorized as investment grade vs. non-investment grade, for the period of time indicated, and based on the ratio of estimated fair value to amortized cost (in millions):

	Period of time for which unrealized loss has existed
	Investment Grade						Non-Investment Grade						Total
Ratio of estimated fair value to amortized cost	Less than or equal to one year		More than one year		Total		Less than or equal to one year		More than one year		Total		Less than or equal to one year		More than one year		Total
December 31, 2009:
99.9% - 80.0%	$	4.2	$	54.0	$	58.2	$	—	$	—	$	—	$	4.2	$	54.0	$	58.2
79.9% - 50.0%		—		85.2		85.2		—		—		—		—		85.2		85.2
Below 50.0%		1.0		62.9		63.9		—		—		—		1.0		62.9		63.9
Total	$	5.2	$	202.1	$	207.3	$	—	$	—	$	—	$	5.2	$	202.1	$	207.3
December 31, 2008:
99.9% - 80.0%	$	19.8	$	36.7	$	56.5	$	—	$	—	$	—	$	19.8	$	36.7	$	56.5
79.9% - 50.0%		129.6		40.9		170.5		—		—		—		129.6		40.9		170.5
Below 50.0%		41.0		187.3		228.3		—		—		—		41.0		187.3		228.3
Total	$	190.4	$	264.9	$	455.3	$	—	$	—	$	—	$	190.4	$	264.9	$	455.3

Commercial mortgage-backed securities’ cash flows are generated by an industry standard fixed income analytics system designed for asset backed securities. In addition, a third party default model is generally utilized within this service to apply loan specific probability of default, refinance risk and loss severity ratios to generate estimated cash flows. Default and prepayment assumptions are deal specific and include, but are not limited to, delinquency, property type, loan size, debt service coverage ratio, loan to value ratios and loan age.

NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES

(a wholly-owned subsidiary of Nationwide Financial Services, Inc.)

Notes to Consolidated Financial Statements, Continued

December 31, 2009, 2008 and 2007

Collateralized Debt Obligations

Collateralized debt obligations are asset-backed securities whose value is derived from the credit quality of the underlying corporate obligations. For collateralized debt obligations, the following tables summarize, as of the dates indicated, the Company’s gross unrealized loss position categorized as investment grade versus non-investment grade, for the period of time indicated, and based on the ratio of estimated fair value to amortized cost (in millions):

	Period of time for which unrealized loss has existed
	Investment Grade						Non-Investment Grade						Total
Ratio of estimated fair value to amortized cost	Less than or equal to one year		More than one year		Total		Less than or equal to one year		More than one year		Total		Less than or equal to one year		More than one year		Total
December 31, 2009:
99.9% - 80.0%	$	0.4	$	3.6	$	4.0	$	0.3	$	15.8	$	16.1	$	0.7	$	19.4	$	20.1
79.9% - 50.0%		—		29.0		29.0		4.2		31.4		35.6		4.2		60.4		64.6
Below 50.0%		—		9.6		9.6		24.0		52.6		76.6		24.0		62.2		86.2
Total	$	0.4	$	42.2	$	42.6	$	28.5	$	99.8	$	128.3	$	28.9	$	142.0	$	170.9
December 31, 2008:
99.9% - 80.0%	$	7.0	$	0.2	$	7.2	$	0.1	$	0.6	$	0.7	$	7.1	$	0.8	$	7.9
79.9% - 50.0%		25.8		37.2		63.0		—		—		—		25.8		37.2		63.0
Below 50.0%		66.5		99.8		166.3		1.4		2.1		3.5		67.9		101.9		169.8
Total	$	99.3	$	137.2	$	236.5	$	1.5	$	2.7	$	4.2	$	100.8	$	139.9	$	240.7

To generate the expected cash flows, agency NRSRO of the underlying corporate securities were used to develop default probabilities. Historical and forecasted loss severities were then applied to develop the expected losses within the security’s collateral pool. An independent data provider is then used to model each security’s structure and waterfall to determine cash flows at the security level. If a recovery estimate is not feasible, then the market’s view of cash flows implied by the current fair value, market discount rates, and effective yield are the primary factors used to estimate recovery.

Within the collateralized debt obligations security type are Pooled Trust Preferreds. Pooled Trust Preferreds are collateralized debt obligations where the collateral is regional bank and insurance company trust preferred securities. All banks in the pools were screened using data provided by U.S. Bank Rating service. The rating service score is a combination of the bank’s liquidity, asset quality, capital adequacy and profitability. The results of the analysis, as well as management’s evaluation of the results and broker research, are used to generate default rates which are modeled to create cash flows from the entire collateral pool underlying each pooled trust preferred security. An independent data provider is then used to model each security’s structure and payment waterfall to determine cash flows at the security level.

NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES

(a wholly-owned subsidiary of Nationwide Financial Services, Inc.)

Notes to Consolidated Financial Statements, Continued

December 31, 2009, 2008 and 2007

Unrealized Gains and Losses

The following table presents the components of net unrealized losses on securities available-for-sale, as of December 31:

(in millions)	2009			2008
Net unrealized losses, before adjustments and taxes	$	(349.6	)	$	(2,743.2	)
Change in fair value attributable to fixed maturity securities designated in fair value hedging relationships		(35.1	)		(57.7	)
Total net unrealized losses, before adjustments and taxes		(384.7	)		(2,800.9	)
Adjustment to deferred policy acquisition costs		31.0			615.9
Adjustment to value of business acquired		0.2			9.6
Adjustment to future policy benefits and claims		19.5			46.9
Adjustment to policyholder dividend obligation		(16.4	)		74.9
Deferred federal income tax benefit		122.6			718.8
Net unrealized losses	$	(227.8	)	$	(1,334.8	)

The following table presents an analysis of the net change in net unrealized gains (losses) on securities available-for-sale before adjustments and taxes for the years ended December 31:

(in millions)	20091		2008			2007
Fixed maturity securities	$	2,381.7	$	(2,682.2	)	$	(132.1	)
Equity securities		11.9		(14.2	)		(4.5	)
Net increase (decrease)	$	2,393.6	$	(2,696.4	)	$	(136.6	)

1 Includes the $384.2 million cumulative effect of adoption of accounting principle as of January 1, 2009 for the adoption of guidance impacting FASB ASC 320-10, Investments – Debt and Equity Securities.  

The following table summarizes the Company’s accumulated other comprehensive losses recognized on debt securities which have credit losses in earnings, based on the adoption of guidance impacting FASB ASC 320-10, Investments – Debt and Equity Securities before federal income tax benefit, for the years ended December 31:

(in millions)	2009
Cumulative adoption of accounting principle as of January 1	$	(384.2	)
Net unrealized gains in the period		38.3
Total1	$	(345.9	)

1 Includes $417.5 million of other-than-temporary impairment losses recognized in other comprehensive income for the year ended December 31, 2009.  

The Company’s practice is to disclose in the table above both the non-credit portion of the other-than-temporary impairment losses recognized in other comprehensive income and any subsequent changes in the fair value of those debt securities, which could result in a net unrealized gain.

NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES

(a wholly-owned subsidiary of Nationwide Financial Services, Inc.)

Notes to Consolidated Financial Statements, Continued

December 31, 2009, 2008 and 2007

Mortgage Loans on Real Estate, Securitization and Real Estate

As of December 31, 2009 and 2008, the carrying value, net of specific reserves, of commercial mortgage loans on real estate considered specifically reserved was $154.8 million and $39.9 million, respectively, for which a $36.4 million and $14.4 million specific reserve had been established, respectively. No specific reserve exists for collateral dependent commercial mortgage loans for which the fair value of the collateral is estimated to be greater than the carrying value.

The following table summarizes activity in the valuation allowance account for mortgage loans on real estate for the years ended December 31:

(in millions)	2009		2008		2007
Allowance, beginning of period	$	42.4	$	24.8	$	36.0
Net change in allowance		35.0		17.6		(11.2	)
Allowance, end of period	$	77.4	$	42.4	$	24.8

The Company has securitized commercial mortgage loans on real estate to third parties. The Company, as the transferor, has continuing involvement in these loans which consists of receiving servicing fees on loans which the Company has transferred.

The Company did not participate in any securitization arrangements during the years ended December 31, 2009 and 2008. The Company received $0.6 million, during the years ended December 31, 2009 and 2008, in servicing fees related to financial assets where there is a continuing involvement from the securitization of commercial mortgage loans on real estate. During 2007, the Company received proceeds of $928.0 million from the securitization of commercial mortgage loans on real estate to third parties, experienced realized losses of $7.3 million on these loans, and received $0.7 million in servicing fees related to loans securitized in 2007 and before.

The Company provided a representations and warranties letter to the transferee for each securitization arrangement. If it is found that the Company has made a misrepresentation, it could be required to provide financial support to the transferee or its beneficial interest holders. For the years ended December 31, 2009, 2008 and 2007, the Company was not required to provide any financial or other support that it was not previously contractually required to provide to the transferee or its beneficial interest holders.

Real estate held for use was $1.8 million and $9.8 million as of December 31, 2009 and 2008, respectively. These assets are carried at cost less accumulated depreciation, which was $0.4 million and $2.1 million as of December 31, 2009 and 2008, respectively. The carrying value of real estate held for sale was $7.1 million and $6.8 million as of December 31, 2009 and 2008, respectively.

Securities Lending

The Company, through an agent, lends certain portfolio holdings and in turn receives cash collateral with the objective of increasing the yield on its investments. The cash collateral is invested in high-quality, short-term and long-term investments. The Company’s policy requires the maintenance of collateral of a minimum of 102% of the fair value of the securities loaned. Net returns on the investments, after payment of a rebate to the borrower, are shared between the Company and its agent. Both the borrower and the Company can request or return the loaned securities at any time. The Company maintains ownership of the loaned securities at all times and is entitled to receive from the borrower any payments for interest or dividends received on such securities during the loan term. The Company recognizes loaned securities as part of its investments available-for-sale. The Company also recognizes the short-term and other long-term investments acquired with the cash collateral and its obligation to return such collateral to the borrower in short-term investments and fixed maturity securities and other liabilities, respectively.

NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES

(a wholly-owned subsidiary of Nationwide Financial Services, Inc.)

Notes to Consolidated Financial Statements, Continued

December 31, 2009, 2008 and 2007

As of December 31, 2009 and December 31, 2008, the Company had received $41.4 million and $419.9 million, respectively, of cash collateral on securities lending. The Company had not received any non-cash collateral on securities lending as of December 31, 2009 and December 31, 2008. As of December 31, 2009 and December 31, 2008, the Company had loaned securities with a fair value of $40.0 million and $407.1 million, respectively.

Assets on Deposit, Held in Trust and Pledged as Collateral

Fixed maturity securities with an amortized cost of $19.2 million and $28.0 million were on deposit with various regulatory agencies as required by law as of December 31, 2009 and 2008, respectively,. These securities continue to be included in fixed maturity securities on the consolidated balance sheets.

Net Investment Income

The following table summarizes net investment income from continuing operations by investment type for the years ended December 31:

(in millions)	2009		2008			2007
Securities available-for-sale:
Fixed maturity securities	$	1,465.1	$	1,477.3		$	1,518.5
Equity securities		1.9		5.3			5.0
Mortgage loans on real estate		445.4		497.1			554.1
Short-term investments		6.4		16.8			31.2
Other		17.0		(75.1	)		152.0
Gross investment income		1,935.8		1,921.4			2,260.8
Less investment expenses		56.7		56.7			68.6
Net investment income	$	1,879.1	$	1,864.7		$	2,192.2

NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES

(a wholly-owned subsidiary of Nationwide Financial Services, Inc.)

Notes to Consolidated Financial Statements, Continued

December 31, 2009, 2008 and 2007

Net Realized Investment Gains and Losses

The following table summarizes net realized investment gains (losses) from continuing operations by source for the years ended December 31:

(in millions)	2009			2008			2007
Total net derivatives gains (losses)1,2		399.8			(330.3	)		(55.9	)
Total realized gains on sales		191.7			40.2			93.3
Total realized losses on sales		(112.8	)		(40.7	)		(85.2	)
Valuation (losses) gains3		(20.7	)		(55.8	)		1.9
Other		(4.2	)		38.8			(1.3	)
Net realized investment gains (losses)	$	453.8		$	(347.8	)	$	(47.2	)

1 Includes gains of $413.6 million and losses of $500.7 million, and $26.7 million on derivatives and embedded derivatives associated with living benefit contracts for the years ended December 31, 2009, 2008, and 2007, respectively.  

2 Includes losses of $171.8 million and gains of $109.4 million on derivatives associated with death benefit contracts for the years ended December 31, 2009 and 2008, respectively. There were no material gains or losses on derivatives associated with death benefit contracts during 2007.  

3 Includes valuation of trading securities, mark-to-market valuation of mortgage loans held for sale, and changes in the valuation allowance not related to specific mortgage loans on real estate.  

Proceeds from the sale of securities available-for-sale during 2009, 2008 and 2007 were $4.21 billion, $4.31 billion and $4.98 billion, respectively. During 2009 and 2008, gross gains of $189.0 million and $35.7 million, respectively, and gross losses of $70.3 million and $25.3 million, respectively, were realized on those sales.

NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES

(a wholly-owned subsidiary of Nationwide Financial Services, Inc.)

Notes to Consolidated Financial Statements, Continued

December 31, 2009, 2008 and 2007

Other-Than-Temporary and Other Investment Impairment Losses

The following table summarizes other-than-temporary impairments for the years ended December 31:

(in millions)	Gross		Included in OCI			Net
2009:
Fixed maturity securities1	$	906.8	$	(417.5	)	$	489.3
Equity securities		7.1		—			7.1
Mortgage loans		71.8		—			71.8
Other		6.4		—			6.4
Total other-than-temporary impairment losses	$	992.1	$	(417.5	)	$	574.6
			2008			2007
Total Impairments:
Fixed maturity securities1			$	1,052.2		$	108.5
Equity securities				60.2			—
Mortgage loans				14.6			4.1
Other				3.7			5.1
Total other-than-temporary impairment losses			$	1,130.7		$	117.7

1 Declines in the creditworthiness of the issuer of hybrid securities with both debt and equity-like features requires the use of the equity model in analyzing the security for other-than-temporary impairment. For the year ended December 31, 2009, the Company recognized $167.6 million in other-than-temporary impairments related to these securities compared to $89.5 million and none for the years ended December 31, 2008 and 2007, respectively.  

NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES

(a wholly-owned subsidiary of Nationwide Financial Services, Inc.)

Notes to Consolidated Financial Statements, Continued

December 31, 2009, 2008 and 2007

The following table summarizes the cumulative amounts related to the Company’s credit loss portion of the other-than-temporary-impairment losses on debt securities held as of December 31, 2009 that the Company does not intend to sell and it is not more likely than not that the Company will be required to sell the security prior to recovery of the amortized cost basis and for which the non-credit portion of the loss is included in other comprehensive income:

(in millions)
Cumulative credit loss as of January 1, 20091	$	507.5
New credit losses		168.4
Incremental credit losses2		71.9
Subtotal		747.8
Less:
Losses related to securities included in the beginning balance sold or paid down during the period		(267.3	)
Losses related to securities included in the beginning balance for which there was a change in intent3		(63.1	)
Increases in cash flows expected to be collected for securities included in the beginning balance		—
Cumulative credit loss as of December 31, 20091	$	417.4

1 The cumulative credit loss amount excludes other-than-temporary-impairment losses on securities held as of the periods indicated that the Company intends to sell or it is more likely than not that the Company will be required to sell the security before the recovery of the amortized cost basis.  

2 On securities included in the beginning balance.  

3 Securities for which a credit-related other-than-temporary impairment loss was previously recorded that the Company now intends to sell or is more likely than not it will be required to sell before recovery of the amortized cost basis and has transferred the non-credit portion of loss previously recorded in other comprehensive income to earnings during the period. Also includes hybrid securities that had previously been evaluated for other-than-temporary impairment based on the criteria as a debt security, but in the current period are evaluated as an equity security due to declines in the creditworthiness of the issuer.  

(7) Deferred Policy Acquisition Costs  

During the fourth quarter of 2009, the Company’s recorded balance of individual variable annuity DAC fell outside the Company’s preset parameters for the prescribed period, which primarily was driven by the continued market recovery and favorable market performance compared to assumed net separate account returns. Accordingly, the Company recalculated DAC using revised best estimate assumptions, which resulted in a increase in DAC and other related balances, including sales inducement assets, and an decrease in DAC amortization and other related balances of $218.5 million pre-tax in the Individual Investments segment. The Company used the reversion to the mean process with the anchor date that was reset during the second quarter 2007 unlocking as described below. The Company evaluated the assumed separate account performance level over the next three years and determined that the assumptions inherent in the reversion period were reasonable. The annual net separate account growth rate for the mean reversion period is 15%, the maximum rate under the Company’s parameters.

NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES

(a wholly-owned subsidiary of Nationwide Financial Services, Inc.)

Notes to Consolidated Financial Statements, Continued

December 31, 2009, 2008 and 2007

During the second quarter of 2009, the Company conducted its annual comprehensive review of model assumptions used to project DAC and other related balances, including sales inducement assets, VOBA and unearned revenue reserves. The review covered all assumptions including mortality, lapses, expenses and general and separate account returns. As a result of this review, certain assumptions were unlocked (DAC unlock). The unlocked assumptions primarily related to lower expected investment spreads and separate account returns across all segments.

The pre-tax positive (negative) impact on the Company’s assets and liabilities as a result of the unlocking of assumptions during 2009 was as follows:

(in millions)	DAC			VOBA			Unearned Revenue Reserves		Sales Inducement Assets		Total
Segment:
Individual Investments	$	191.9		$	—		$	—	$	10.9	$	202.8
Retirement Plans		(8.2	)		—			—		—		(8.2	)
Individual Protection		(43.9	)		(13.2	)		10.9		—		(46.2	)
Total	$	139.8		$	(13.2	)	$	10.9	$	10.9	$	148.4

During the fourth quarter of 2008, the Company’s recorded balance of individual variable annuity DAC fell outside the Company’s preset parameters, which primarily was driven by continued unfavorable market performance compared to assumed net separate account returns. Management made a determination that it was not reasonably possible to get back within the preset parameters during the remaining prescribed period. Accordingly, the Company recalculated DAC using revised best estimate assumptions, which resulted in a decrease in DAC and an increase in DAC amortization and other related balances of $243.1 million pre-tax in the Individual Investments segment. The Company used the reversion to the mean process with the anchor date that was reset during the second quarter 2007 unlocking as described below. The Company evaluated the assumed separate account performance level over the next three years and determined that the assumptions inherent in the reversion period were reasonable. The annual net separate account growth rate for the mean reversion period is 15%, the maximum rate under the Company’s parameters.

During the third quarter of 2008, the Company’s recorded balance of individual variable annuity DAC fell outside the Company’s preset parameters for the prescribed period, which primarily was driven by unfavorable market performance compared to the assumed net separate account returns. Accordingly, the Company recalculated DAC using revised best estimate assumptions, which resulted in a decrease in DAC and an increase in DAC amortization and other related balances totaling $177.2 million pre-tax in the Individual Investments segment.

At the end of the second quarter of 2008, the Company determined as part of its comprehensive annual study of assumptions that certain assumptions should be unlocked. The unlocked assumptions primarily related to lapse and spread assumptions in the Individual Investments segment, the assumed growth rate on deposits per contract in the Retirement Plans segment, and mortality and lapse assumptions in the Individual Protection segment.

NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES

(a wholly-owned subsidiary of Nationwide Financial Services, Inc.)

Notes to Consolidated Financial Statements, Continued

December 31, 2009, 2008 and 2007

The pre-tax positive (negative) impact on the Company’s assets and liabilities as a result of the unlocking of assumptions during the year ended December 31, 2008 was as follows:

(in millions)	DAC			VOBA			Unearned Revenue Reserves		Sales Inducement Assets			Total
Segment:
Individual Investments	$	(429.1	)	$	(2.6	)	$	—	$	(0.6	)	$	(432.3	)
Retirement Plans		(2.3	)		—			—		—			(2.3	)
Individual Protection		(2.8	)		7.5			3.2		—			7.9
Total	$	(434.2	)	$	4.9		$	3.2	$	(0.6	)	$	(426.7	)

During the second quarter of 2007, the Company conducted its annual comprehensive review of model assumptions used to project DAC and other related balances, including sales inducement assets, VOBA, unearned revenue reserves, and guaranteed minimum death and income benefit reserves. This review included all assumptions, including expected separate account investment returns during the three-year reversion period, lapse rates, mortality and expenses. The Company determined as part of this annual review that the overall separate account returns were expected to exceed previous estimates due to favorable financial market trends. Additionally, while the Company estimated that the overall profitability of its variable products had improved, it expected the long-term net growth in separate account investment performance to moderate.

Accordingly, the second quarter 2007 unlocking process included changes in several assumptions, including assumptions affecting net separate account investment performance. This unlocking resulted in a net increase in DAC and a benefit to DAC amortization and other related balances totaling $216.5 million pre-tax. First, the Company reset the anchor date for its reversion to the mean calculations, which increased the annual net separate account growth rate to 7% during the first three years of the projection period from 0% (which was the rate of return for the three-year reversion period required from the previous anchor date). Second, as a result of its current analysis, including its evaluation of ongoing trends and expectations regarding financial market performance, the Company unlocked and reset its long-term assumption for net separate account growth rates to 7% from 8%. This decreased the net separate account growth rate by 1% to 7% for all years subsequent to the three-year reversion period. The combination of resetting these two factors resulted in a $161.9 million increase in DAC and benefit to DAC amortization and other related balances. The impact of changing the annual net separate account growth rate from 0% to 7% during the three-year reversion period had a much larger effect on the DAC balance when compared to the 1% incremental change in the long-term assumption for net separate account investment performance. The remainder of the increase in DAC and benefit to DAC amortization and other related balances resulting from the DAC unlocking process primarily was related to the recorded balance of individual variable annuity DAC falling outside the Company’s preset parameters for the prescribed period, which was driven by favorable market performance in excess of the assumed net separate account returns. Accordingly, the Company recalculated DAC using revised best estimate assumptions, which resulted in a $78.8 million increase in DAC and benefit to DAC amortization and other related balances. This was partially offset by a $24.2 million decrease in DAC and increase in DAC amortization and other related balances due to increasing estimated lapse rates for fixed annuity and BOLI products.

During the second quarter of 2007, the Company added a new feature to its existing GLWB rider, Lifetime Income (L.inc). This new feature resulted in a substantial change in the existing contracts and, therefore, an extinguishment of the DAC associated with those contracts pursuant to the American Institute of Certified Public Accountants’ Statement of Position 05-1, Accounting by Insurance Enterprises for Deferred Acquisition Costs in Connection with Modifications or Exchanges of Insurance Contracts. As a result, the Company eliminated existing DAC and other related balances resulting in a $135.0 million pre-tax charge.

NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES

(a wholly-owned subsidiary of Nationwide Financial Services, Inc.)

Notes to Consolidated Financial Statements, Continued

December 31, 2009, 2008 and 2007

The pre-tax positive (negative) impact on the Company’s assets and liabilities as a result of the unlocking of these assumptions during the second quarter of 2007 was as follows:

(in millions)	DAC			VOBA		Unearned Revenue Reserves		Sales Inducement Assets		Total
Segment:
Individual Investments	$	(208.9	)	$	—	$	—	$	12.5	$	(196.4	)
Retirement Plans		(10.5	)		—		—		—		(10.5	)
Individual Protection		(16.4	)		5.1		1.7		—		(9.6	)
Total	$	(235.8	)	$	5.1	$	1.7	$	12.5	$	(216.5	)

The following table presents a reconciliation of DAC for the years ended December 31:

(in millions)	2009			2008
Balance at beginning of period	$	4,523.8		$	4,095.6
Capitalization of DAC		513.0			587.6
Amortization of DAC, excluding unlocks		(605.4	)		(257.4	)
Amortization of DAC, related to unlocks		139.8			(434.2	)
Adjustments to DAC related to unrealized gains and losses on securities available-for-sale and other		(588.1	)		532.2
Balance at end of period	$	3,983.1		$	4,523.8

(8) Value of Business Acquired and Other Intangible Assets  

The following table presents a reconciliation of VOBA for the years ended December 31:

(in millions)	2009			2008
Balance at beginning of period	$	334.0		$	354.8
Amortization of VOBA		(49.4	)		(31.4	)
Net realized losses on investments		1.7			1.9
Other		—			0.5
Subtotal		286.3			325.8
Change in unrealized (loss) gain on available-for-sale securities		(9.4	)		8.2
Balance at end of period	$	276.9		$	334.0

Interest on the unamortized VOBA balance (at interest rates ranging from 4.50% to 7.56%) is included in amortization and was $20.1 million, $22.4 million and $24.8 million during the years ended December 31, 2009, 2008 and 2007, respectively.

NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES

(a wholly-owned subsidiary of Nationwide Financial Services, Inc.)

Notes to Consolidated Financial Statements, Continued

December 31, 2009, 2008 and 2007

The following table summarizes intangible assets as of December 31:

(in millions)	Initial useful life1	2009				2008
		Gross carrying amount		Accumulated amortization		Gross carrying amount		Accumulated amortization
Amortizing:
VOBA	28 years	$	594.9	$	318.0	$	594.9	$	270.5
Distribution forces	20 years		7.0		7.0		7.0		1.3
Total intangible assets		$	601.9	$	325.0	$	601.9	$	271.8

1 The initial useful life was based on applicable assumptions. Actual periods are subject to revision based on variances from assumptions and other relevant factors.  

During the fourth quarter of 2009, the Company recorded a $5.4 million pre-tax impairment charge on intangible assets associated with the NFN retirement services distribution channel.

During 2009, the Company fully amortized intangible assets related to NLICA and NLACA state insurance licenses, which resulted in a $7.8 million pre-tax charge. The state insurance licenses had indefinite useful lives and were not previously amortized. Due to the merger with NLIC and NLAIC, respectively, on December 31, 2009, the NLICA and NLACA state insurance licenses are no longer required as the surviving entities have the required state insurance licenses to conduct business on existing NLICA and NLACA products. The Company will surrender the state insurance licenses back to each state. See Note 1 for a description of the merger transaction between these entities.

During 2008, the Company recorded a $19.7 million pre-tax impairment charge on career agency force and independent agency force intangible assets associated with its plan to exit the NFN professional consulting group sales channel and selling arrangement changes for the independent agency force.

The Company’s annual impairment testing performed as of June 30, did not result in material impairment losses on intangible assets during 2009, 2008 and 2007.

Based on current assumptions, which are subject to change, the following table summarizes estimated amortization for the next five years ended December 31:

(in millions)	VOBA
2010	$	28.8
2011		24.2
2012		21.9
2013		19.4
2014		16.0

NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES

(a wholly-owned subsidiary of Nationwide Financial Services, Inc.)

Notes to Consolidated Financial Statements, Continued

December 31, 2009, 2008 and 2007

(9) Goodwill  

The following table summarizes changes in the carrying value of goodwill by segment for the years indicated:

(in millions)	Retirement Plans		Individual Protection		Total
Balance as of December 31, 2007	$	25.4	$	174.4	$	199.8
Adjustments		—		—		—
Balance as of December 31, 2008		25.4		174.4		199.8
Adjustments		—		—		—
Balance as of December 31, 2009	$	25.4	$	174.4	$	199.8

The Company’s 2009 annual impairment testing did not result in any impairments on existing goodwill. As of the 2009 annual impairment testing, the fair value of the reporting units with goodwill was in excess of the carrying value. The goodwill balances as of 12/31/09 have not been previously impaired.

NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES

(a wholly-owned subsidiary of Nationwide Financial Services, Inc.)

Notes to Consolidated Financial Statements, Continued

December 31, 2009, 2008 and 2007

(10) Closed Block  

The amounts shown in the following tables for assets, liabilities, revenues and expenses of the closed block are those that enter into the determination of amounts that are to be paid to policyholders.

The following table summarizes financial information for the closed block as of December 31:

(in millions)	2009			2008
Liabilities:
Future policyholder benefits	$	1,818.0		$	1,844.2
Policyholder funds and accumulated dividends		142.9			142.7
Policyholder dividends payable		28.7			31.7
Policyholder dividend obligation		48.7			(62.2	)
Other policy obligations and liabilities		13.8			9.2
Total liabilities		2,052.1			1,965.6
Assets:
Fixed maturity securities available-for-sale, at estimated fair value		1,236.2			1,082.1
Mortgage loans on real estate		263.2			294.8
Policy loans		190.5			197.9
Other assets		135.4			152.3
Total assets		1,825.3			1,727.1
Excess of reported liabilities over assets		226.8			238.5
Portion of above representing other comprehensive income:
Increase (decrease) in unrealized gain on fixed maturity securities available-for-sale		90.8			(88.6	)
Adjustment to policyholder dividend obligation		(90.8	)		88.6
Total		—			—
Maximum future earnings to be recognized from assets and liabilities	$	226.8		$	238.5
Other comprehensive income:
Fixed maturity securities available-for-sale:
Fair value	$	1,236.2		$	1,082.1
Amortized cost		1,252.6			1,157.0
Shadow policyholder dividend obligation		(16.4	)		74.9
Net unrealized appreciation	$	—		$	—

NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES

(a wholly-owned subsidiary of Nationwide Financial Services, Inc.)

Notes to Consolidated Financial Statements, Continued

December 31, 2009, 2008 and 2007

The following table summarizes closed block operations for the years ended December 31:

(in millions)	2009			2008			2007
Revenues:
Premiums	$	89.6		$	92.9		$	95.7
Net investment income		105.6			108.9			102.5
Realized investment gains (losses)		1.8			(40.9	)		(1.5	)
Realized (losses) gains credited to to policyholder benefit obligation		(5.8	)		36.9			(2.5	)
Total revenues		191.2			197.8			194.2
Benefits and expenses:
Policy and contract benefits		132.9			131.1			136.4
Change in future policyholder benefits and interest credited to policyholder accounts		(24.4	)		(17.4	)		(19.3	)
Policyholder dividends		59.2			62.9			61.1
Change in policyholder dividend obligation		4.4			2.6			(3.6	)
Other expenses		1.1			1.2			1.2
Total benefits and expenses		173.2			180.4			175.8
Total revenues, net of benefits and expenses, before federal income tax expense		18.0			17.4			18.4
Federal income tax expense		6.3			6.1			6.4
Revenues, net of benefits and expenses and federal income tax expense	$	11.7		$	11.3		$	12.0
Maximum future earnings from assets and liabilities:
Beginning of period	$	238.5		$	249.8		$	261.8
Change during period		(11.7	)		(11.3	)		(12.0	)
End of period	$	226.8		$	238.5		$	249.8

Cumulative closed block earnings from inception through December 31, 2009 and 2008 were higher than expected as determined in the actuarial calculation. Therefore, policyholder dividend obligations (excluding the adjustment for unrealized gains on available-for-sale securities) were $32.3 million and $12.7 million as of December 31, 2009 and 2008, respectively.

NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES

(a wholly-owned subsidiary of Nationwide Financial Services, Inc.)

Notes to Consolidated Financial Statements, Continued

December 31, 2009, 2008 and 2007

(11) Variable Contracts  

The Company issues traditional variable annuity contracts through its separate accounts, for which investment income and gains and losses on investments accrue directly to, and investment risk is borne by, the contractholder. The Company also issues non-traditional variable annuity contracts in which the Company provides various forms of guarantees to benefit the related contractholders. The Company provides five primary guarantee types under non-traditional variable annuity contracts: (1) guaranteed minimum death benefits (GMDB); (2) GMAB; (3) guaranteed minimum income benefits (GMIB); (4) GLWB; and (5) a hybrid guarantee with GMAB and GLWB.

The GMDB provides a specified minimum return upon death. Many of these death benefits are spousal, whereby a death benefit will be paid upon death of the first spouse. The survivor has the option to terminate the contract or continue it and have the death benefit paid into the contract and a second death benefit paid upon the survivor’s death. The Company has offered six primary GMDB types:

• Return of premium – provides the greater of account value or total deposits made to the contract less any partial withdrawals and assessments, which is referred to as “net premiums.” There are two variations of this benefit. In general, there is no lock in age for this benefit. However, for some contracts the GMDB reverts to the account value at a specified age, typically age 75.  

• Reset – provides the greater of a return of premium death benefit or the most recent five-year anniversary (prior to lock-in age) account value adjusted for withdrawals. For most contracts, this GMDB locks in at age 86 or 90, and for others the GMDB reverts to the account value at age 75, 85, 86 or 90.  

• Ratchet – provides the greater of a return of premium death benefit or the highest specified “anniversary” account value (prior to age 86) adjusted for withdrawals. Currently, there are three versions of ratchet, with the difference based on the definition of anniversary: monthaversary – evaluated monthly; annual – evaluated annually; and five-year – evaluated every fifth year.  

• Rollup – provides the greater of a return of premium death benefit or premiums adjusted for withdrawals accumulated at generally 5% simple interest up to the earlier of age 86 or 200% of adjusted premiums. There are two variations of this benefit: for certain contracts, this GMDB locks in at age 86, and for others the GMDB reverts to the account value at age 75.  

• Combo – provides the greater of annual ratchet death benefit or rollup death benefit. This benefit locks in at either age 81 or 86.  

• Earnings enhancement – provides an enhancement to the death benefit that is a specified percentage of the adjusted earnings accumulated on the contract at the date of death. There are two versions of this benefit: (1) the benefit expires at age 86, and a credit of 4% of account value is deposited into the contract; and (2) the benefit does not have an end age, but has a cap on the payout and is paid upon the first death in a spousal situation. Both benefits have age limitations. This benefit is paid in addition to any other death benefits paid under the contract.  

The GMAB, offered in the Company’s Capital Preservation Plus contract rider, is a living benefit that provides the contractholder with a guaranteed return of premium, adjusted proportionately for withdrawals, after a specified time period (5, 7 or 10 years) selected by the contractholder at the issuance of the variable annuity contract. In some cases, the contractholder also has the option, after a specified time period, to drop the rider and continue the variable annuity contract without the GMAB. In general, the GMAB requires a minimum allocation to guaranteed term options or adherence to limitations required by an approved asset allocation strategy.

The GLWB, offered in the Company’s L.inc, is a living benefit that provides for enhanced retirement income security without the liquidity loss associated with annuitization. The withdrawal rates vary based on the age when withdrawals begin and are applied to a benefit base to determine the guaranteed lifetime income amount available to a contractholder. The benefit base is equal to the variable annuity premium at contract issuance and may increase as a result of a ratchet feature that is driven by account performance and a roll-up feature that is driven by policy duration.

NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES

(a wholly-owned subsidiary of Nationwide Financial Services, Inc.)

Notes to Consolidated Financial Statements, Continued

December 31, 2009, 2008 and 2007

The GMIB is a living benefit that provides the contractholder with a guaranteed annuitization value. The GMIB types are:

• Ratchet – provides an annuitization value equal to the greater of account value, net premiums or the highest one-year anniversary account value (prior to age 86) adjusted for withdrawals.  

• Rollup – provides an annuitization value equal to the greater of account value and premiums adjusted for withdrawals accumulated at 5% compound interest up to the earlier of age 86 or 200% of adjusted premiums.  

• Combo – provides an annuitization value equal to the greater of account value, ratchet GMIB benefit or rollup GMIB benefit.  

In January 2009, the Company decided to simplify its living benefit guarantees and only offer L.inc on new sales.

NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES

(a wholly-owned subsidiary of Nationwide Financial Services, Inc.)

Notes to Consolidated Financial Statements, Continued

December 31, 2009, 2008 and 2007

All GMAB contracts with the hybrid GMAB/GLWB rider are included with GMAB contracts in the following tables. The following table summarizes the account values and net amount at risk, net of reinsurance, for variable annuity contracts with guarantees invested in both general and separate accounts as of December 31 (a contract may contain multiple guarantees):

	2009									2008
(in millions)	General account value		Separate account value		Total account value		Net amount at risk1		Wtd. avg. attained age	General account value		Separate account value		Total account value		Net amount at risk1		Wtd. avg. attained age
GMDB:
Return of premium	$	728.8	$	5,859.6	$	6,588.4	$	99.5	61	$	912.1	$	5,082.2	$	5,994.3	$	440.6	60
Reset		1,622.4		12,406.1		14,028.5		899.5	64		2,282.3		10,259.8		12,542.1		2,477.7	64
Ratchet		1,181.3		13,835.5		15,016.8		1,772.4	67		1,877.7		10,545.7		12,423.4		3,775.3	67
Rollup		41.8		258.7		300.5		17.7	73		48.5		241.9		290.4		25.9	72
Combo		229.1		1,577.3		1,806.4		325.6	69		306.0		1,398.1		1,704.1		621.2	69
Subtotal		3,803.4		33,937.2		37,740.6		3,114.7	65		5,426.6		27,527.7		32,954.3		7,340.7	65
Earnings enhancement		16.5		373.4		389.9		19.6	64		28.1		305.4		333.5		7.2	63
Total - GMDB	$	3,819.9	$	34,310.6	$	38,130.5	$	3,134.3	65	$	5,454.7	$	27,833.1	$	33,287.8	$	7,347.9	65
GMAB2:
5 Year	$	383.0	$	2,639.8	$	3,022.8	$	171.5	N/A	$	607.0	$	2,260.6	$	2,867.6	$	499.0	N/A
7 Year		393.6		2,151.9		2,545.5		180.4	N/A		451.6		1,814.3		2,265.9		482.9	N/A
10 Year		70.2		684.6		754.8		39.5	N/A		80.2		597.7		677.9		132.2	N/A
Total - GMAB	$	846.8	$	5,476.3	$	6,323.1	$	391.4	N/A	$	1,138.8	$	4,672.6	$	5,811.4	$	1,114.1	N/A
GMIB3:
Ratchet	$	16.3	$	242.0	$	258.3	$	0.3	N/A	$	16.2	$	228.5	$	244.7	$	5.6	N/A
Rollup		46.6		625.6		672.2		0.4	N/A		47.1		612.4		659.5		1.3	N/A
Combo		—		0.2		0.2		—	N/A		—		0.1		0.1		—	N/A
Total - GMIB	$	62.9	$	867.8	$	930.7	$	0.7	N/A	$	63.3	$	841.0	$	904.3	$	6.9	N/A
GLWB:
L.inc	$	229.7	$	7,056.7	$	7,286.4	$	67.3	N/A	$	72.4	$	3,248.4	$	3,320.8	$	571.5	N/A
Porfolio income insurance		—		20.7		20.7		—	N/A		—		—		—		—	N/A
Total - GLWB	$	229.7	$	7,077.4	$	7,307.1	$	67.3	N/A	$	72.4	$	3,248.4	$	3,320.8	$	571.5	N/A

1 Net amount at risk is calculated on a seriatim basis and equals the respective guaranteed benefit less the account value (or zero if the account value exceeds the guaranteed benefit). As it relates to GMIB, net amount at risk is calculated as if all policies were eligible to annuitize immediately, although all GMIB options have a waiting period of at least 7 years from issuance.  

2 GMAB contracts with the hybrid GMAB/GLWB rider had account values of $5.32 billion and $4.59 billion as of December 31, 2009 and 2008, respectively.  

3 The weighted average period remaining until expected annuitization is not meaningful and has not been presented because there is currently no material GMIB exposure.  

Net amount at risk is highly sensitive to changes in financial market movements. See Note 5, Derivatives Not Qualifying for Hedge Accounting – Equity Market Risk Management, for a discussion of the Company’s risk management practices with respect to financial market exposure.

NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES

(a wholly-owned subsidiary of Nationwide Financial Services, Inc.)

Notes to Consolidated Financial Statements, Continued

December 31, 2009, 2008 and 2007

The following table summarizes account balances of variable annuity contracts that were invested in separate accounts as of December 31:

(in millions)	2009		2008
Mutual funds:
Bond	$	4,920.2	$	4,370.3
Domestic equity		24,598.8		18,676.2
International equity		3,046.9		2,421.4
Total mutual funds		32,565.9		25,467.9
Money market funds		1,473.4		2,146.4
Total	$	34,039.3	$	27,614.3

The following table summarizes the reserve balances, net of reinsurance, for variable annuity contracts with guarantees as of December 31:

(in millions)	2009		2008
Living benefit riders	$	265.9	$	1,698.0
GMDB		67.0		193.4
GMIB		3.1		5.5

The Company’s living benefit riders represent an embedded derivative in a variable annuity contract that is required to be separated from, and valued apart from, the host variable annuity contract. The embedded derivatives are carried at fair value. Subsequent changes in the fair value of the embedded derivatives are recognized in earnings as a component of net realized investment gains and losses. The fair value of the embedded derivatives is calculated based on a combination of capital market and actuarial assumptions.Projections of cash flows inherent in the valuation of the embedded derivative incorporate numerous assumptions including, but not limited to, expectations of contractholder persistency, contractholder withdrawal patterns, risk neutral market returns, correlations of market returns and market return volatility. As of December 31, 2009 and 2008, the net balance of the embedded derivatives for living benefits was a liability of $265.9 million and a liability of $1.70 billion, respectively. The GLWB component of living benefit riders was immaterial in 2009 and $699.9 million in 2008, respectively.

The Company’s incurred and paid amounts for living benefit features were immaterial for the years ended December 31, 2009 and 2008. The incurred and paid amounts were immaterial for 2008. The Company does not expect any meaningful level of claims under the living benefit features for several years and believes the impact of claims is expected to be mitigated by its economic hedging program.

During the year ended December 31, 2009, the Company recorded net realized investment gains on living benefit embedded derivatives and related economic hedging gains of $413.6 million. These gains were comprised of $1.50 billion of net realized investment gains on living benefit embedded derivatives and $1.08 billion of related economic hedging losses. The net realized investment gains on living benefit embedded derivatives primarily resulted from higher interest rates, lower volatility assumptions and an increase to the nonperformance component of the discount rate. The increase in net realized investment gains on embedded derivatives increased amortization of DAC by $389.6 million in 2009 compared to 2008, which is included in the Corporate and Other segment.

NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES

(a wholly-owned subsidiary of Nationwide Financial Services, Inc.)

Notes to Consolidated Financial Statements, Continued

December 31, 2009, 2008 and 2007

The Company’s GMDB claim reserves are determined by estimating the expected value of death benefits on contracts that trigger a policy benefit and recognizing the excess ratably over the accumulation period based on total expected assessments. GMIB claim reserves are determined each period by estimating the expected value of annuitization benefits in excess of the projected account balance at the date of annuitization and recognizing the excess ratably over the accumulation period based on total assessments. The Company regularly evaluates its GMDB and GMIB claim reserve estimates and adjusts the additional liability balances as appropriate, with a related charge or credit to other benefits and claims in the period of evaluation if actual experience or other evidence suggests that earlier assumptions should be revised. The assumptions used in calculating GMIB claim reserves are consistent with those used for calculating GMDB claim reserves. In addition, the calculation of GMIB claim reserves assumes benefit utilization ranges from a low of 3% when the contractholder’s annuitization value is at least 10% in the money to 100% utilization when the contractholder is 90% or more in the money.

The Company’s incurred and paid amounts for GMDBs were $132.4 million for the year ended December 31, 2009 compared to $67.1 million for the year ended December 31, 2008.

The following assumptions and methodology were used to determine the GMDB claim reserves as of December 31, 2009 and 2008:

• Data used was based on a combination of historical numbers and future projections generally involving 250 and 50 probabilistically generated economic scenarios as of December 31, 2009 and 2008, respectively  

• Mean gross equity performance – 10.4% and 8.1% as of December 31, 2009 and 2008, respectively  

• Equity volatility – 18.0% and 18.7% as of December 31, 2009 and 2008, respectively  

• Mortality – 91% of Annuity 2000 Basic table for males, 101% for females as of December 31, 2009; and 100% of Annuity 2000 tables as of December 31, 2008  

• Asset fees – equivalent to mutual fund and product loads  

• Discount rate – approximately 7.0%  

Lapse rate assumptions vary by duration as shown below:

December 31, 2009 Duration (years)	1	2	3	4	5	6	7	8	9	10+
Minimum	1.0%	2.0%	2.5%	3.0%	5.0%	6.0%	7.0%	7.0%	10.0%	10.0%
Maximum	3.5%	2.0%	4.0%	4.5%	35.0%	40.0%	18.5%	32.5%	32.5%	18.5%
December 31, 2008 Duration (years)	1	2	3	4	5	6	7	8	9	10+
Minimum	1.0%	2.0%	2.0%	3.0%	4.5%	6.0%	7.0%	7.0%	11.5%	11.5%
Maximum	1.5%	2.5%	4.0%	4.5%	40.0%	41.5%	21.5%	35.0%	35.0%	18.5%

The Company’s incurred and paid amounts for GMIBs were $7.2 million for the years ended December 31, 2009. The incurred and paid amounts were immaterial for 2008.

The Company did not transfer assets from the general account to the separate account for any of its variable annuity contracts during the years ended December 31, 2009 and 2008.

NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES

(a wholly-owned subsidiary of Nationwide Financial Services, Inc.)

Notes to Consolidated Financial Statements, Continued

December 31, 2009, 2008 and 2007

The following table summarizes account balances of variable universal life insurance contracts that were invested in separate accounts as of December 31:

(in millions)	2009		2008
Mutual funds:
Bond	$	452.8	$	412.7
Domestic equity		2,996.3		2,459.5
International equity		416.9		334.6
Total mutual funds		3,866.0		3,206.8
Money market funds		257.0		295.0
Total	$	4,123.0	$	3,501.8

(12) Short-Term Debt  

The following table summarizes short-term debt as of December 31:

(in millions)	2009		2008
$800.0 million commercial paper program	$	150.0	$	149.9
$350.0 million securities lending program facility		—		99.8
Total short-term debt	$	150.0	$	249.7

The Company has entered into an agreement with its custodial bank to borrow against the cash collateral that is posted in connection with its securities lending program. This is an uncommitted facility contingent on the liquidity of the securities lending program. The borrowing facility was established to fund commercial mortgage loans that were originated with the intent of sale through securitization. The maximum amount available under the agreement is $350.0 million. The borrowing rate on this program is equal to one-month U.S. London Interbank Offered Rate (LIBOR). On July 31, 2009, the Company paid down the $99.7 million principal balance on the securities lending program facility. The Company had no amounts outstanding under this agreement as of December 31, 2009 compared to $99.8 million as of December 31, 2008.

The Company has available as a source of funds a $1.00 billion revolving credit facility entered into by NFS, NLIC and NMIC with a maturity of May 13, 2010. The facility provides for several and not joint liability with respect to any amount drawn by any party. The facility contains covenants, including, but not limited to, requirements that NMIC maintain statutory surplus in excess of $5.30 billion, the Company’s debt not exceed 40% of tangible net worth, as defined, and that NLIC maintain statutory surplus in excess of $1.67 billion. A breach by any borrower of the financial covenants will impact the availability of the line for the other borrowers and may accelerate payment. NMIC had no amounts outstanding under this agreement as of December 31, 2009. NLIC also has an $800.0 million commercial paper program and rating agency guidelines recommend that NLIC maintain minimum liquidity backup, which includes cash and liquid assets as well as committed bank lines, equal to 50% of any amounts outstanding under the commercial paper program. Therefore, availability under the aggregate $1.00 billion credit facility is reduced by the amount outstanding in excess of available cash and liquid assets. NLIC had $150.0 million of commercial paper outstanding at December 31, 2009 at a weighted average interest rate of 0.29% and $149.9 million outstanding at December 31, 2008 at a weighted average interest rate of 2.07%.

The Company paid interest on short-term debt totaling $1.3 million, $8.3 million, and $15.0 million in 2009, 2008 and 2007, respectively.

NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES

(a wholly-owned subsidiary of Nationwide Financial Services, Inc.)

Notes to Consolidated Financial Statements, Continued

December 31, 2009, 2008 and 2007

(13) Long-Term Debt  

The following table summarizes surplus notes payable to NFS as of December 31:

(in millions)	2009		2008
8.15% surplus note, due June 27, 2032	$	300.0	$	300.0
7.50% surplus note, due December 17, 2031		300.0		300.0
6.75% surplus note, due December 23, 2033		100.0		100.0
Total long-term debt	$	700.0	$	700.0

The Company made interest payments to NFS on surplus notes totaling $53.7 million in 2009, 2008 and 2007. Payments of interest and principal under the notes require the prior approval of the Ohio Department of Insurance (ODI).

On September 30, 2009, the Company sold NLICA, a 5.75%, $200.0 million surplus note maturing on September 30, 2010. Due to the merger of NLICA with and into the Company on December 31, 2009, the note was redeemed, in whole, by the Company at a redemption price equal to 100% of the aggregate principal amount outstanding plus accrued interest.

NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES

(a wholly-owned subsidiary of Nationwide Financial Services, Inc.)

Notes to Consolidated Financial Statements, Continued

December 31, 2009, 2008 and 2007

(14) Federal Income Taxes  

Effective January 1, 2009, pursuant to the merger agreement dated August 6, 2008 whereby NMIC and its affiliates purchased all of the NFS common stock they did not already own, Nationwide Corporation will own more than 80% of the value of NFS, meeting the requirements for NFS to join the NMIC consolidated federal income tax return. However, the life insurance company subsidiaries will not be eligible to join the NMIC consolidated federal income tax return until 2014. NFS will file a one day life/non-life, federal income tax return (January 1, 2009) with all of its downstream subsidiaries.

The following table summarizes the tax effects of temporary differences that give rise to significant components of the net deferred tax asset (liability) as of December 31:

(in millions)	2009			2008
Deferred tax assets:
Future policy benefits and claims	$	1,108.5		$	955.6
Securities available-for-sale		—			809.2
Derivatives		62.6			229.7
Capital loss carryforward		102.8			—
Other		267.1			258.0
Gross deferred tax assets		1,541.0			2,252.5
Less valuation allowance		(23.7	)		(23.7	)
Deferred tax assets, net of valuation allowance		1,517.3			2,228.8
Deferred tax liabilities:
Deferred policy acquisition costs		(1,083.7	)		(1,293.6	)
Securities available-for-sale		(215.9	)		—
Value of business acquired		(95.6	)		(112.9	)
Other		(96.9	)		(168.3	)
Gross deferred tax liabilities		(1,492.1	)		(1,574.8	)
Net deferred tax asset (liability)	$	25.2		$	654.0

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion of the total gross deferred tax assets will not be realized. Future taxable amounts or recovery of federal income taxes paid within the statutory carryback period can offset nearly all future deductible amounts. Because it is more likely than not that certain deferred tax assets will not be realized, the Company established a valuation allowance of $23.7 million, $23.7 million and $23.7 million as of December 31, 2009, 2008 and 2007, respectively. No additional valuation allowances are required to be recognized as the Company has prudent and feasible tax planning strategies that would, if necessary, be implemented to utilize deferred tax assets.

The Company’s current federal income tax (liability) asset was $(108.5) million and $132.1 million as of December 31, 2009 and 2008, respectively.

Total federal income taxes (refunded) paid were $(59.0) million, $(40.9) million, and $117.9 million during the years ended December 31, 2009, 2008 and 2007, respectively.

As of December 31, 2009, the Company has $293.7 million of capital loss carryforwards that can carry forward for five tax years and are expected to be fully utilized. In addition, the Company has $6.7 million in low income housing credit carryforwards which can be carried forward for twenty years. The Company expects that they will be fully utilized. The Company has $22.7 million in Alternative Minimum Tax (AMT) credit carryforwards, which can be carried forward until utilized. The Company expects to fully realize the AMT credits in the future.

NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES

(a wholly-owned subsidiary of Nationwide Financial Services, Inc.)

Notes to Consolidated Financial Statements, Continued

December 31, 2009, 2008 and 2007

The following table summarizes the federal income tax expense (benefit) attributable to income (loss) from continuing operations for the years ended December 31:

(in millions)	2009			2008			2007
Current	$	165.0		$	(130.8	)	$	108.0
Deferred		(117.1	)		(403.0	)		39.3
Federal income tax expense (benefit)	$	47.9		$	(533.8	)	$	147.3

Total federal income tax expense (benefit) differs from the amount computed by applying the U.S. federal income tax rate to income (loss) from continuing operations before federal income tax expense (benefit) as follows for the years ended December 31:

	2009					2008					2007
(dollars in millions)	Amount			%		Amount			%		Amount			%
Computed tax expense (benefit)	$	107.3		35.0		$	(497.4	)	35.0		$	220.2		35.0
DRD		(56.1	)	(18.3	)		(42.1	)	3.0			(67.5	)	(10.7	)
Impact of noncontrolling interest		18.3		6.0			25.3		(1.8	)		17.8		2.8
Tax credits		(21.4	)	(7.0	)		(25.8	)	1.8			(22.3	)	(3.6	)
Other, net		(0.2	)	(0.1	)		6.2		(0.4	)		(0.9	)	(0.1	)
Total	$	47.9		15.6		$	(533.8	)	37.6		$	147.3		23.4

During 2009, the Company recorded $8.7 million of net federal income tax expense adjustments primarily related to differences between the 2008 estimated tax liability and the amounts reported on the Company’s 2008 tax returns. These changes in estimates primarily were driven by the Company’s separate account dividends received deduction (DRD) and foreign tax credit.

During the third quarter of 2008, the Company refined its separate account DRD calculation and estimation process. As a result, the Company reduced its third quarter separate account DRD projection from a federal income tax benefit of $14.3 million to a $4.4 million benefit. This reduction in estimate primarily was driven by the assumptions used in the estimation process regarding future dividend income within the separate accounts. The assumptions used in the separate account DRD calculation are based on the Company’s best estimate of future events.

In addition, during 2008, the Company recorded $11.9 million of net federal income tax expense adjustments primarily related to differences between the 2007 estimated tax liability and the amounts expected to be reported on the Company’s 2007 tax returns when filed. These changes in estimates primarily were driven by the Company’s separate account DRD.

During 2007, the Company recorded $7.6 million of net federal income tax expense adjustments primarily related to differences between the 2006 estimated tax liability and the amounts the Company reported on its 2006 tax returns.

NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES

(a wholly-owned subsidiary of Nationwide Financial Services, Inc.)

Notes to Consolidated Financial Statements, Continued

December 31, 2009, 2008 and 2007

A rollforward of the beginning and ending uncertain tax positions, including permanent and temporary differences, but excluding interest and penalties, is as follows:

(in millions)	2009			2008
Balance at beginning of period	$	44.0		$	8.8
Additions for current year tax positions		36.8			37.7
Additions for prior years tax positions		14.9			0.3
Reductions for prior years tax positions		(1.1	)		(2.8	)
Balance at end of period	$	94.6		$	44.0

The total amount of unrecognized tax benefits that, if recognized, would impact the effective tax rate on December 31, 2009, is $43.0 million.

The Company has included tax on permanent uncertain tax positions and interest and penalties on all uncertain tax positions in determining the potential impact on the effective tax rate above. An uncertain tax timing position may result in the acceleration of cash payments to the IRS, but will not impact the effective tax rate.

During the years ended December 31, 2009, and 2008, the Company incurred $0.2 million and $1.0 million in interest and penalties, respectively. The Company accrued $3.8 million and $2.2 million for the payment of interest and penalties at December 31, 2009 and 2008, respectively. Interest expense and any associated penalties are shown as income tax expense.

Management is not aware of any reasonable possibility of a significant increase or decrease to the total of the uncertain tax positions within the next 12 months.

The Company files income tax returns in the U.S. federal jurisdiction and various state jurisdictions. With few exceptions, the Company is no longer subject to U.S. federal, state or local income tax examinations by tax authorities for years through 2002. The IRS recently completed an audit of the Company’s tax years 2003 through 2005. The statute remains open for these years as the Company completes the appeals process. See “Tax Matters” in Note 18 for more information on the Company’s tax years 2003 through 2005 audit and the related appeals process.

NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES

(a wholly-owned subsidiary of Nationwide Financial Services, Inc.)

Notes to Consolidated Financial Statements, Continued

December 31, 2009, 2008 and 2007

(15) Shareholder’s Equity, Regulatory Risk-Based Capital, Statutory Results and Dividend Restrictions  

Regulatory Risk-Based Capital

The State of Ohio, where NLIC and NLAIC are domiciled, imposes minimum risk-based capital requirements that were developed by the NAIC. The formulas for determining the amount of risk-based capital specify various weighting factors that are applied to financial balances or various levels of activity based on the perceived degree of risk. Regulatory compliance is determined by a ratio of total adjusted capital, as defined by the NAIC, to authorized control level risk-based capital, as defined by the NAIC. Companies below specific trigger points or ratios are classified within certain levels, each of which requires specified corrective action. NLIC and NLAIC each exceeded the minimum risk-based capital requirements for all periods presented herein.

Statutory Results

The Company and its subsidiary are required to prepare statutory financial statements in conformity with the NAIC’s Accounting Practices and Procedures Manual, subject to any deviations prescribed or permitted by the applicable state department of insurance. Statutory accounting practices focus on insurer solvency and differ from GAAP materially. The principal differences include charging policy acquisition and certain sales inducement costs to expense as incurred, establishing future policy benefits and claims reserves using different actuarial assumptions, excluding certain assets from statutory admitted assets; and valuing investments and establishing deferred taxes on a different basis. The following tables summarize the statutory net income (loss) and statutory capital and surplus for the Company and its insurance subsidiary for the years ended December 31:

(in millions)	20091			2008			2007
Statutory net income (loss)
NLIC	$	397.3		$	(919.4	)	$	410.8
NLAIC		(61.1	)		(90.3	)		(4.0	)
Statutory capital and surplus
NLIC	$	3,129.6		$	2,749.9		$	2,599.9
NLAIC		213.5			122.6			256.6

1 Unaudited as of the date of this report.  

On December 31, 2009, NLIC merged with its affiliate, NLICA, with NLIC as the surviving entity. In addition, NLIC’s subsidiary, NLAIC, merged with a subsidiary of NLICA, NLACA, effective as of December 31, 2009, with NLAIC as the surviving entity. See Note 2 (p) for details on the accounting treatment of this transaction.

NLIC received approval from the Ohio Department of Insurance (ODI) regarding the use of a permitted practice related to the statutory accounting provision for the admissibility of deferred tax assets as of December 31, 2008. The permitted practice modifies the practice prescribed by the NAIC by increasing the threshold for admissibility of deferred tax assets from 10% to 15% of statutory capital and surplus. The permitted practice resulted in an increase of NLIC’s estimated statutory surplus of $68.9 million as of December 31, 2008. The permitted practice had no impact on NLIC’s statutory net income. The benefits of this permitted practice was not considered by the Company when determining capital and surplus available for dividends during 2009.

In 2009, the NAIC adopted Statement of Statutory Accounting Principles No. 10R, Income Tax Revised – a temporary replacement of SSAP 10, which is similar to the ODI permitted practice adopted in 2008 with the exception of limiting capital and surplus available for dividends.

NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES

(a wholly-owned subsidiary of Nationwide Financial Services, Inc.)

Notes to Consolidated Financial Statements, Continued

December 31, 2009, 2008 and 2007

Dividend Restrictions

The payment of dividends by NLIC is subject to restrictions set forth in the insurance laws and regulations of the State of Ohio, its domiciliary state. The State of Ohio insurance laws require Ohio-domiciled life insurance companies to seek prior regulatory approval to pay a dividend or distribution of cash or other property if the fair market value thereof, together with that of other dividends or distributions made in the preceding 12 months, exceeds the greater of (1) 10% of statutory-basis policyholders’ surplus as of the prior December 31 or (2) the statutory-basis net income of the insurer for the prior year. NLIC’s statutory capital and surplus as of December 31, 2009 was $3.13 billion, and statutory net income for the year ended December 31, 2009 was $397.3 million. During the year ended December 31, 2009, NLIC did not pay any dividends to NFS during 2009. As of January 1, 2010, NLIC has the ability to pay dividends to NFS totaling $397.3 million upon providing prior notice to the ODI.

The State of Ohio insurance laws also require insurers to seek prior regulatory approval for any dividend paid from other than earned surplus. Earned surplus is defined under the State of Ohio insurance laws as the amount equal to the Company’s unassigned funds as set forth in its most recent statutory financial statements, including net unrealized capital gains and losses or revaluation of assets. Additionally, following any dividend, an insurer’s policyholder surplus must be reasonable in relation to the insurer’s outstanding liabilities and adequate for its financial needs. The payment of dividends by NLIC may also be subject to restrictions set forth in the insurance laws of the State of New York that limit the amount of statutory profits on NLIC’s participating policies (measured before dividends to policyholders) available for the benefit of the Company and its shareholder.

The Company currently does not expect such regulatory requirements to impair its ability to pay future operating expenses, interest and shareholder dividends.

NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES

(a wholly-owned subsidiary of Nationwide Financial Services, Inc.)

Notes to Consolidated Financial Statements, Continued

December 31, 2009, 2008 and 2007

Comprehensive Gain (Loss)

The Company’s other comprehensive income and loss includes net income (loss) and certain items that are reported directly within separate components of shareholder’s equity that are not recorded in net income.

The following table summarizes the Company’s other comprehensive gain (loss), before and after federal income tax expense (benefit), for the years ended December 31:

(in millions)	2009			2008			2007
Net unrealized losses on securities available-for-sale arising during the period:
Net unrealized gains (losses) before adjustments	$	2,373.9		$	(3,827.8	)	$	(273.1	)
Net non-credit gains		38.4			—			—
Net adjustment to DAC		(584.9	)		528.8			3.8
Net adjustment to VOBA		(9.4	)		8.2			8.0
Net adjustment to future policy benefits and claims		(27.4	)		127.8			5.9
Net adjustment to policyholder dividend obligation		(91.3	)		88.7			2.2
Related federal income tax (expense) benefit		(594.8	)		1,076.1			88.6
Net unrealized gains (losses)		1,104.5			(1,998.2	)		(164.6	)
Reclassification adjustment for net realized losses on securities available-for-sale realized during the period:
Net realized losses		388.2			1,102.1			105.0
Related federal income tax benefit		(135.9	)		(385.7	)		(36.8	)
Net reclassification adjustment		252.3			716.4			68.2
Other comprehensive gain (loss) on securities available-for-sale		1,356.8			(1,281.8	)		(96.4	)
Accumulated net holding (losses) gains on cash flow hedges:
Unrealized holding (losses) gains		(4.1	)		16.5			(17.2	)
Related federal income tax benefit (expense)		1.5			(5.8	)		6.0
Other comprehensive (loss) income on cash flow hedges		(2.6	)		10.7			(11.2	)
Other unrealized (losses) gains:
Net unrealized (losses) gains		(13.5	)		7.4			(7.4	)
Related federal income tax benefit (expense)		4.7			(2.5	)		2.7
Other net unrealized (losses) gains		(8.8	)		4.9			(4.7	)
Unrecognized amounts on pension plans:
Net unrecognized amounts		—			(12.3	)		1.0
Related federal income tax benefit (expense)		—			4.3			(0.4	)
Other comprehensive (loss) income on unrecognized pension amounts		—			(8.0	)		0.6
Total other comprehensive income (loss)	$	1,345.4		$	(1,274.2	)	$	(111.7	)

NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES

(a wholly-owned subsidiary of Nationwide Financial Services, Inc.)

Notes to Consolidated Financial Statements, Continued

December 31, 2009, 2008 and 2007

The adjustments to DAC and VOBA represent the changes in amortization of DAC and VOBA that would have been required as a charge or credit to operations had such unrealized amounts been realized and allocated to the product lines. The adjustment to future policy benefits and claims represents the increase in policy reserves from using a discount rate that would have been required had such unrealized amounts been realized and the proceeds reinvested at then current market interest rates, which were lower than the then current effective portfolio rate.

The adoption of guidance impacting FASB ASC 320-10, Investments – Debt and Equity Securities resulted in a cumulative-effect adjustment of $235.0 million, net of taxes, to reclassify the non-credit component of previously recognized other-than-temporary impairment losses from the beginning balance of retained earnings to AOCI.

Adjustments for net realized gains and losses on the ineffective portion of cash flow hedges were immaterial during the years ended December 31, 2009, 2008 and 2007.

(16) Employee Benefit Plans  

The Company, excluding certain affiliated companies, participates in a qualified defined benefit pension plan (the Nationwide Retirement Plan or the NRP), several non-qualified defined benefit supplemental executive retirement plans, postretirement benefit plans (life and health care), and the Nationwide Savings Plan 401(k), all sponsored by NMIC. Effective January 30, 2008, NMIC merged the Nationwide Life Insurance Company of America (NLICA) Retirement Plan into the NRP.

The NRP covers all employees of participating employers who have completed at least one year of service and who are at least 21 years of age. Plan assets are invested in a third-party trust and group annuity contracts issued by NLIC. All participants are eligible for benefits based on an account balance formula. However, participants hired prior to 2002 are eligible for benefits based on the highest average annual salary of a specified number of consecutive years of the last ten years of service, if such benefits are of greater value than the account balance feature.

Effective January 1, 2010, NMIC amended the NRP to eliminate the company-paid early retirement enhancement (an additional benefit for associates retiring between ages 55 and 65), which is part of the FAP formula and to stop pay credits under the account balance formula for participants eligible for the account balance formula. An affected associate’s benefits, however, will not be less than the NRP benefit he or she accrued as of December 31, 2009, under the greater of the FAP formula or the account balance formula.

The Company funds pension costs accrued for direct employees plus an allocation of pension costs accrued for employees of affiliates whose work benefits the Company. In addition, separate non-qualified defined benefit pension plans sponsored by NMIC cover certain executives with at least one year of service. The Company’s portion of expense relating to these plans was $11.0 million, $4.6 million, and $11.8 million for the years ended December 31, 2009, 2008 and 2007, respectively. The 2008 expense includes a gain of $5.4 million due to the merger of the NLICA Retirement Plan into the NRP.

See Note 17 for more information on group annuity contracts issued by the Company for various employee benefit plans sponsored by NMIC or its affiliates.

In addition to the NRP, the Company and certain affiliated companies participate in life and health care benefit plans sponsored by NMIC for qualifying retirees. Contributory post-retirement life and health care benefits are generally available to associates, hired prior to and continuously employed since June 1, 2000, for health care benefits, and prior to December 31, 1994, for life benefits, who have attained age 55, and have accumulated 15 years of service with the Company. The associate subsidy for the post-retirement death benefit was capped beginning in 2007. Employer subsidies for retiree life insurance ended as of December 31, 2008. No future employer contributions are anticipated for retiree life insurance and settlement accounting was applied during 2008. Post-retirement health care benefit contributions are adjusted annually and contain cost-sharing features such as deductibles and co-insurance. In addition, there are caps on the Company’s contribution to the cost of the post-retirement health care benefits. The Company does not receive a Medicare Part D subsidy from the government. The Company’s policy is to fund the cost of health care benefits in amounts determined at the discretion of management. Plan assets are invested in a group annuity contract issued by NLIC and a third-party trust.

NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES

(a wholly-owned subsidiary of Nationwide Financial Services, Inc.)

Notes to Consolidated Financial Statements, Continued

December 31, 2009, 2008 and 2007

On September 3, 2009, NMIC announced changes to the post-retirement health care benefits available under the health care defined benefit plans. On December 31, 2009, each eligible associate’s current cost-sharing percentage was fixed and, following this date, Company contributions towards the cost of post-retirement health care coverage for eligible associates will be based only on service through December 31, 2009. This modification does not impact former associates receiving Nationwide-sponsored retiree health care benefits prior to January 1, 2010. Additionally, effective January 1, 2010, all associates not considered to be highly compensated employees, as defined by IRC 414, became eligible to receive an annual retiree health care credit up to a maximum of $1,000 per year, not to exceed a maximum lifetime benefit amount of $25,000, which includes any years of cost-sharing service earned by December 31, 2009. The credit is equal to one-third of otherwise unmatched Health Savings Account contributions and/or Nationwide Savings Plan (NSP) 401(a) contributions. No contributions will be made by NMIC if the associate does not make eligible contributions.

The Company’s portion of expense relating to these plans was immaterial for the years ended December 31, 2009, 2008 and 2007.

Defined Contribution Plans

NMIC sponsors the NSP, a defined contribution retirement savings plan (a 401(k) plan) covering substantially all of the Company’s associates. Associates may make salary deferral contributions of up to 80%. Salary deferrals of up to 6% are subject to a 50% Company match. In addition, NMIC sponsors the NLICA Producer’s Pension Plan, a defined contribution money purchase plan, covering statutory employees of NLICA. However, this plan has no active participants, and is in the process of being terminated. The Company’s expense for contributions to these plans was $8.7 million, $6.1 million, and $8.0 million for the years ended December 31, 2009, 2008 and 2007, respectively.

(17) Related Party Transactions  

The Company has entered into significant, recurring transactions and agreements with NMIC, other affiliates and subsidiaries as a part of its ongoing operations. These include annuity and life insurance contracts, office space leases, and agreements related to reinsurance, cost sharing, administrative services, marketing, intercompany loans, intercompany repurchases, cash management services and software licensing. Measures used to allocate expenses among companies include individual employee estimates of time spent, special cost studies, the number of full-time employees, commission expense and other methods agreed to by the participating companies.

In addition, Nationwide Services Company, LLC (NSC), a subsidiary of NMIC, provides data processing, systems development, hardware and software support, telephone, mail and other services to the Company, based on specified rates for units of service consumed. For the years ended December 31, 2009, 2008 and 2007, the Company made payments to NMIC and NSC totaling $233.1 million, $285.2 million, and $287.1 million, respectively.

The Company has issued group annuity and life insurance contracts and performs administrative services for various employee benefit plans sponsored by NMIC or its affiliates. Total account values of these contracts were $3.10 billion and $2.96 billion as of December 31, 2009 and 2008, respectively. Total revenues from these contracts were $143.1 million, $137.9 million and $132.3 million for the years ended December 31, 2009, 2008 and 2007, respectively, and include policy charges, net investment income from investments backing the contracts and administrative fees. Total interest credited to the account balances was $115.7 million, $115.6 million, and $110.1 million for the years ended December 31, 2009, 2008 and 2007, respectively. The terms of these contracts are consistent in all material respects with what the Company offers to unaffiliated parties.

The Company leases office space from NMIC. For the years ended December 31, 2009, 2008 and 2007, the Company made lease payments to NMIC of $23.8 million, $21.5 million, and $23.0 million, respectively. In addition, the Company leases office space to an affiliate of NMIC.

NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES

(a wholly-owned subsidiary of Nationwide Financial Services, Inc.)

Notes to Consolidated Financial Statements, Continued

December 31, 2009, 2008 and 2007

NLIC has a reinsurance agreement with NMIC whereby all of NLIC’s accident and health business not ceded to unaffiliated reinsurers is ceded to NMIC on a modified coinsurance basis. Either party may terminate the agreement on January 1 of any year with prior notice. Under a modified coinsurance agreement, the ceding company retains invested assets, and investment earnings are paid to the reinsurer. Under the terms of NLIC’s agreements, the investment risk associated with changes in interest rates is borne by the reinsurer. The ceding of risk does not discharge the original insurer from its primary obligation to the policyholder. The Company believes that the terms of the modified coinsurance agreements are consistent in all material respects with what the Company could have obtained with unaffiliated parties. Revenues ceded to NMIC for the years ended December 31, 2009, 2008 and 2007 were $176.8 million, $202.3 million, and $317.6 million, respectively, while benefits, claims and expenses ceded during these years were $196.2 million, $218.9 million, and $348.1 million, respectively.

Funds of Nationwide Funds Group (NFG), an affiliate, are offered to the Company’s customers as investment options in certain of the Company’s products. As of December 31, 2009 and 2008, customer allocations to NFG funds totaled $23.73 billion and $18.08 billion, respectively. For the years ended December 31, 2009, 2008, and 2007, NFG paid the Company $78.8 million, $76.7 million, and $79.6 million, respectively, for the distribution and servicing of these funds.

The Company also participates in intercompany repurchase agreements with affiliates whereby the seller transfers securities to the buyer at a stated value. Upon demand or after a stated period, the seller repurchases the securities at the original sales price plus interest. As of December 31, 2009 and 2008, the Company had no outstanding borrowings from affiliated entities under such agreements. During 2009, the Company had no outstanding borrowings at any given time. During 2008 and 2007, the most the Company had outstanding at any given time was $151.6 million and $178.2 million, respectively, and the amounts the Company incurred for interest expense on intercompany repurchase agreements during these years were immaterial.

The Company and various affiliates have agreements with Nationwide Cash Management Company (NCMC), an affiliate, under which NCMC acts as a common agent in handling the purchase and sale of short-term securities for the respective accounts of the participants. Amounts on deposit with NCMC for the benefit of the Company were $918.7 million and $2.58 billion as of December 31, 2009 and 2008, respectively, and are included in short-term investments on the consolidated balance sheets.

Certain annuity products are sold through affiliated companies, which are also subsidiaries of NFS. Total commissions and fees paid to these affiliates for the years ended December 31, 2009, 2008 and 2007 were $48.3 million, $52.7 million, and $59.5 million, respectively.

An affiliate of the Company is currently developing a browser-based policy administration and online brokerage software application for defined benefit plans. In connection with the development of this application, the Company made net payments, which were expensed, to that affiliate related to development totaling $11.2 million, $11.0 million, and $9.4 million for the years ended December 31, 2009, 2008 and 2007, respectively.

The Company entered into a note purchase agreement with an affiliate on November 17, 2006 to purchase $25.0 million of the affiliate’s 5.6% senior notes due November 16, 2016. The notes are secured by certain pledged mortgage servicing rights. The note is payable in seven equal principal installments of $3.8 million, which begin November 6, 2010. Interest is payable semi-annually on each May 16 and November 16.

Through September 30, 2002, the Company filed a consolidated federal income tax return with NMIC, as discussed in more detail in Note 14. Effective October 1, 2002, NLIC began filing a consolidated federal income tax return with NLAIC. Total payments to (from) NMIC were $4.0 million and ($22.5) million during the years ended December 31, 2009 and 2008, respectively. These payments related to tax years prior to deconsolidation. There were no payments during 2007.

During 2009, NLIC received a $20.0 million capital contribution from NFS.

During 2009, NLIC did not pay dividends to NFS. In 2008 and 2007, NLIC paid dividends to NFS totaling $460.5 million, and $612.5 million, respectively.

NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES

(a wholly-owned subsidiary of Nationwide Financial Services, Inc.)

Notes to Consolidated Financial Statements, Continued

December 31, 2009, 2008 and 2007

During 2009, the Company sold, at fair value, commercial mortgage loans with a carrying value of $273.2 million to Nationwide Mutual Insurance Company (NMIC). The sale resulted in a net realized loss of $33.5 million to the Company.

During 2009, the Company sold private equity investments to NMIC for $61.0 million, including the one private equity investment that is considered a VIE (See Note 20). The private equity investments were carried and sold at fair value. No gain or loss was recognized on the sale.

NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES

(a wholly-owned subsidiary of Nationwide Financial Services, Inc.)

Notes to Consolidated Financial Statements, Continued

December 31, 2009, 2008 and 2007

(18) Contingencies  

Legal Matters

The Company is a party to litigation and arbitration proceedings in the ordinary course of its business. It is often not possible to determine the ultimate outcome of the pending investigations and legal proceedings or to provide reasonable ranges of potential losses with any degree of certainty. Some matters, including certain of those referred to below, are in very preliminary stages, and the Company does not have sufficient information to make an assessment of the plaintiffs’ claims for liability or damages. In some of the cases seeking to be certified as class actions, the court has not yet decided whether a class will be certified or (in the event of certification) the size of the class and class period. In many of the cases, the plaintiffs are seeking undefined amounts of damages or other relief, including punitive damages and equitable remedies, which are difficult to quantify and cannot be defined based on the information currently available. The Company does not believe, based on information currently known by management, that the outcomes of such pending investigations and legal proceedings are likely to have a material adverse effect on the Company’s consolidated financial position. However, given the large and/or indeterminate amounts sought in certain of these matters and inherent unpredictability of litigation, it is possible that an adverse outcome in certain matters could have a material adverse effect on the Company’s consolidated financial position or results of operations in a particular period.

In recent years, life insurance companies have been named as defendants in lawsuits, including class action lawsuits relating to life insurance and annuity pricing and sales practices. A number of these lawsuits have resulted in substantial jury awards or settlements against life insurers other than the Company.

The financial services industry, including mutual fund, variable annuity, retirement plan, life insurance and distribution companies, has also been the subject of increasing scrutiny on a broad range of issues by regulators, legislators and the media over the past few years. Numerous regulatory agencies, including the SEC, the Financial Industry Regulatory Authority and the New York State Attorney General, have commenced industry-wide investigations on such issues as late trading and market timing in connection with mutual funds and variable insurance contracts, and have commenced enforcement actions against some mutual fund and life insurance companies on those issues. The Company has responded to information requests and/or subpoenas from the SEC in 2003 and the New York State Attorney General in 2005 in connection with investigations regarding market timing in certain mutual funds offered in insurance products sponsored by the Company. The Company is not aware of any further action on these matters.

In addition, state and federal regulators and other governmental bodies have commenced investigations, proceedings or inquiries relating to compensation and bidding arrangements and possible anti-competitive activities between insurance producers and brokers and issuers of insurance products, and unsuitable sales and replacements by producers on behalf of the issuer. Also under investigation are compensation and revenue sharing arrangements between the issuers of variable insurance contracts and mutual funds or their affiliates, fee arrangements in retirement plans, the use of side agreements and finite reinsurance agreements, funding agreements issued to back MTN programs, recordkeeping and retention compliance by broker-dealers, and supervision of former registered representatives. Related investigations, proceedings or inquiries may be commenced in the future. The Company and/or its affiliates have been contacted by, self reported or received subpoenas from state and federal regulatory agencies and other governmental bodies, state securities law regulators and state attorneys general for information relating to certain of these investigations, including those relating to compensation, revenue sharing and bidding arrangements, anti-competitive activities, unsuitable sales or replacement practices, fee arrangements in retirement plans, the use of side agreements and finite reinsurance agreements, and funding agreements backing the MTN program. The Company is cooperating with regulators in connection with these inquiries and will cooperate with NMIC in responding to these inquiries to the extent that any inquiries encompass NMIC’s operations.

A promotional and marketing arrangement associated with the Company’s offering of a retirement plan product and related services in Alabama is under investigation by the Alabama Attorney General, which assumed the investigation from the Alabama Securities Commission. The Company currently expects that any damages paid to settle this matter will not have a material adverse impact on its consolidated financial position. It is not possible to predict what effect, if any, the outcome of this investigation may have on the Company’s retirement plan operations with respect to promotional and marketing arrangements in general in the future.

NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES

(a wholly-owned subsidiary of Nationwide Financial Services, Inc.)

Notes to Consolidated Financial Statements, Continued

December 31, 2009, 2008 and 2007

These proceedings are expected to continue in the future and could result in legal precedents and new industry-wide legislation, rules and regulations that could significantly affect the financial services industry, including mutual fund, retirement plan, life insurance and annuity companies. These proceedings also could affect the outcome of one or more of the Company’s litigation matters. There can be no assurance that any litigation or regulatory actions will not have a material adverse effect on the Company’s consolidated financial position or results of operations in the future.

On September 10, 2009, NRS was named in a lawsuit filed in the Circuit Court for Montgomery County, Alabama entitled Twanna Brown, Individually and on behalf of all other persons in Alabama who are similarly situated, v Nationwide Retirement Solutions, Inc., Alabama State Employees Association, PEBCO, Inc., Edwin “Mac” McArthur, Steve Walkley, Glenn Parker, Ulysses Lavender, Diana McLain, Randy Hebson, and Robert Wagstaff; and Unknown Defendants A-Z. On January 22, 2010, Brown filed an Amended Complaint alleging in Count One, that all the defendants were involved in a civil conspiracy and seeks to recover actual damages, forfeiture of all other payments and/or salaries to be the fruit of such other payments, punitive damages and costs and attorneys fees. In Count Two, although NRS is not named, it is alleged that the remaining defendants breached their fiduciary duties and seeks actual damages, forfeiture of all other payments and/or salaries to be the fruit of such other payments, punitive damages and costs and attorneys fees. In Count Three, although NRS is not named, the plaintiff seeks declaratory relief that the individual defendants breached their fiduciary duties, seeks injunctive relief permanently removing said defendants from their respective offices in the Alabama State Employees Association (ASEA) and PEBCO and costs and attorneys fees. In Count Four, it alleges that any money Nationwide paid belonged exclusively to ASEA for the use and benefit of its membership at large and not for the personal benefit of the individual defendants. Plaintiff seeks to recover actual damages from the individual defendants, forfeiture of all other payments and/or salaries to be the fruit of such other payments, punitive damages and costs and attorneys fees. On February 5, 2010, the Company filed a motion to dismiss, or in the alternative, a motion to stay the amended complaint. On February 9, 2010, the individual defendants filed a motion to dismiss the amended complaint. On December 13, 2009, the plaintiff filed a motion to consolidate this case with Nationwide Retirement Solutions, Inc. v. Alabama State Personnel Board, PEBCO, Inc. and Alabama State Employees Association. The Company continues to defend this case vigorously.

NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES

(a wholly-owned subsidiary of Nationwide Financial Services, Inc.)

Notes to Consolidated Financial Statements, Continued

December 31, 2009, 2008 and 2007

On November 20, 2007, NRS and NLIC were named in a lawsuit filed in the Circuit Court of Jefferson County, Alabama entitled Ruth A. Gwin and Sandra H. Turner, and a class of similarly situated individuals v Nationwide Life Insurance Company, Nationwide Retirement Solutions, Inc., Alabama State Employees Association, PEBCO, Inc. and Fictitious Defendants A to Z. On December 2, 2008, NRS and NLIC were named in an Amended Class Action Complaint filed in the Circuit Court of Jefferson County, Alabama entitled Ruth A. Gwin, Steven E. Coker, Sandra H. Turner, and a class of similarly situated individuals v. Nationwide Life Insurance Company, Nationwide Retirement Solutions, Inc, Alabama State Employees Association, Inc., PEBCO, Inc. and Fictitious Defendants A to Z claiming to represent a class of all participants in the ASEA Plan, excluding members of the Deferred Compensation Committee, members of the Board of Control, ASEA’s directors, officers and board members, and PEBCO directors, officers and board members. The class period is from November 20, 2001 to the date of trial. In the amended class action complaint, the plaintiffs allege breach of fiduciary duty, wantonness and breach of contract. The amended class action complaint seeks a declaratory judgment, an injunction, an appointment of an independent fiduciary to protect Plan participants, disgorgement of amounts paid, reformation of Plan documents, compensatory damages and punitive damages, plus interest, attorneys’ fees and costs and such other equitable and legal relief to which plaintiffs and class members may be entitled. Also, on December 2, 2008, the plaintiffs filed a motion for preliminary injunction seeking an order requiring periodic payments made by NRS and/or NLIC to ASEA or PEBCO to be held in a trust account for the benefit of Plan participants. On December 16, 2008, the Companies filed their Answer. On April 28, 2009, the court entered an order denying the plaintiffs’ motion for preliminary injunction. NRS and NLIC continue to defend this case vigorously.

On July 11, 2007, NLIC was named in a lawsuit filed in the United States District Court for the Western District of Washington at Tacoma entitled Jerre Daniels-Hall and David Hamblen, Individually and on behalf of All Others Similarly Situated v. National Education Association, NEA Member Benefits Corporation, Nationwide Life Insurance Company, Security Benefit Life Insurance Company, Security Benefit Group, Inc., Security Distributors, Inc., et. al. The plaintiffs seek to represent a class of all current or former National Education Association (NEA) members who participated in the NEA Valuebuilder 403(b) program at any time between January 1, 1991 and the present (and their heirs and/or beneficiaries). The plaintiffs allege that the defendants violated the Employee Retirement Income Security Act of 1974, as amended (ERISA) by failing to prudently and loyally manage plan assets, by failing to provide complete and accurate information, by engaging in prohibited transactions, and by breaching their fiduciary duties when they failed to prevent other fiduciaries from breaching their fiduciary duties. The complaint seeks to have the defendants restore all losses to the plan, restoration of plan assets and profits to participants, disgorgement of endorsement fees, disgorgement of service fee payments, disgorgement of excessive fees charged to plan participants, other unspecified relief for restitution, declaratory and injunctive relief, and attorneys’ fees. On May 23, 2008, the Court granted the defendants’ motion to dismiss. On June 19, 2008, the plaintiffs filed a notice of appeal. On July 10, 2009, the Court of Appeals heard oral argument. NLIC continues to defend this lawsuit vigorously.

On November 15, 2006, NFS, NLIC and NRS were named in a lawsuit filed in the United States District Court for the Southern District of Ohio entitled Kevin Beary, Sheriff of Orange County, Florida, In His Official Capacity, Individually and On Behalf of All Others Similarly Situated v. Nationwide Life Insurance Co., Nationwide Retirement Solutions, Inc. and Nationwide Financial Services, Inc. The plaintiff sought to represent a class of all sponsors of 457(b) deferred compensation plans in the United States that had variable annuity contracts with the defendants at any time during the class period, or in the alternative, all sponsors of 457(b) deferred compensation plans in Florida that had variable annuity contracts with the defendants during the class period. The class period is from January 1, 1996 until the class notice is provided. The plaintiff alleged that the defendants breached their fiduciary duties by arranging for and retaining service payments from certain mutual funds. The complaint sought an accounting, a declaratory judgment, a permanent injunction and disgorgement or restitution of the service fee payments allegedly received by the defendants, including interest. On January 25, 2007, NFS, NLIC and NRS filed a motion to dismiss. On September 17, 2007, the Court granted the motion to dismiss. On October 1, 2007, the plaintiff filed a motion to vacate judgment and for leave to file an amended complaint. On September 15, 2008, the Court denied the plaintiffs’ motion to vacate judgment and for leave to file an amended complaint. On February 3, 2010, the Sixth Circuit Court of Appeals affirmed the District Court’s dismissal of this case. NFS, NLIC and NRS continue to defend this lawsuit vigorously.

NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES

(a wholly-owned subsidiary of Nationwide Financial Services, Inc.)

Notes to Consolidated Financial Statements, Continued

December 31, 2009, 2008 and 2007

On August 15, 2001, NFS and NLIC were named in a lawsuit filed in the United States District Court for the District of Connecticut entitled Lou Haddock, as trustee of the Flyte Tool & Die, Incorporated Deferred Compensation Plan, et al v. Nationwide Financial Services, Inc. and Nationwide Life Insurance Company. In the plaintiffs’ sixth amended complaint, filed November 18, 2009, they amended the list of named plaintiffs and claim to represent a class of qualified retirement plan trustees under ERISA that purchased variable annuities from NLIC. The plaintiffs allege that they invested ERISA plan assets in their variable annuity contracts and that NLIC and NFS breached ERISA fiduciary duties by allegedly accepting service payments from certain mutual funds. The complaint seeks disgorgement of some or all of the payments allegedly received by NFS and NLIC, other unspecified relief for restitution, declaratory and injunctive relief, and attorneys’ fees. On November 6, 2009, the Court granted the plaintiff’s motion for class certification and certified a class of “All trustees of all employee pension benefit plans covered by ERISA which had variable annuity contracts with NFS and NLIC or whose participant’s had individual variable annuity contracts with NFS and NLIC at any time from January 1, 1996, or the first date NFS and NLIC began receiving payments from mutual funds based on a percentage of assets invested in the funds by NFS and NLIC, whichever came first, to the date of November 6, 2009”. Also on November 6, 2009, the Court denied plaintiffs’ motion to strike NFS and NLIC’s counterclaim for breach of fiduciary duty against the Trustees, in the event NFS and NLIC are held to be a fiduciary at trial, and granted H. Grady Chandler’s motion to intervene. On November 23, 2009, NFS and NLIC filed a rule 23(f) petition asking the Second Circuit Court of Appeals to hear an appeal of the District Court’s order granting class certification. On December 2, 2009, NFS and NLIC filed an answer to the 6th Amended Complaint. On January 29, 2010, the Companies filed a motion for class certification against the four named plaintiffs, as trustees of their respective retirement plans and against the trustees of other ERISA retirement plans who become members of the class certified in this lawsuit, for breach of fiduciary duty to the plans because the trustees approved and accepted the advantages of the allegedly unlawful “revenue sharing” payments. NFS and NLIC continue to defend this lawsuit vigorously.

Tax Matters

Management has established tax reserves in accordance with current accounting guidance, which prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. These reserves are reviewed regularly and are adjusted as events occur that management believes impact its liability for additional taxes, such as lapsing of applicable statutes of limitations; conclusion of tax audits or substantial agreement on the deductibility/nondeductibility of uncertain items; additional exposure based on current calculations; identification of new issues; release of administrative guidance; or rendering of a court decision affecting a particular tax issue. Management believes its tax reserves reasonably provide for potential assessments that may result from IRS examinations and other tax-related matters for all open tax years.

The separate account dividends received deduction (DRD) is a significant component of the Company’s federal income tax provision. On August 16, 2007, the IRS issued Revenue Ruling 2007-54. This ruling took a position with respect to the DRD that could have significantly reduced the Company’s DRD. The Company believes that the position taken by the IRS in the ruling was contrary to existing law and the relevant legislative history.

NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES

(a wholly-owned subsidiary of Nationwide Financial Services, Inc.)

Notes to Consolidated Financial Statements, Continued

December 31, 2009, 2008 and 2007

In Revenue Ruling 2007-61, released September 25, 2007, the IRS and the U.S. Department of the Treasury suspended Revenue Ruling 2007-54 and informed taxpayers of their intention to address certain issues in connection with the DRD in future tax regulations. Final tax regulations could impact the Company’s DRD in periods subsequent to their effective date.

The IRS recently completed an audit of the Company’s tax years 2003 through 2005. As a result of this audit, the Company received a Revenue Agent’s Report (RAR) and 30-Day Letter (requiring payment of additional tax due or the preparation of protest to start the appeals process) from the IRS in July 2009. The RAR includes an adjustment to reduce the Company’s DRD for the above tax years resulting in additional tax due of $151.0 million. The Company is currently at appeals on this issue and believes that it will ultimately prevail based on technical merits.

(19) Guarantees  

Since 2002, the Company has sold $696.1 million of credit enhanced equity interests in LIHTC Funds to unrelated third parties. The Company has guaranteed cumulative after-tax yields to the third party investors ranging from 3.75% to 7.75% over periods ending between 2002 and 2025. As of December 31, 2009 and 2008, the Company held guarantee reserves totaling $5.5 million and $5.1 million, respectively, on these transactions. These guarantees are in effect for periods of approximately 15 years each. The LIHTC Funds provide a stream of tax benefits to the investors that will generate a yield and return of capital. If the tax benefits are not sufficient to provide these cumulative after-tax yields, then the Company must fund any shortfall, which is mitigated by stabilization collateral set aside by the Company at the inception of the transactions. The maximum amount of undiscounted future payments that the Company could be required to pay the investors under the terms of the guarantees is $985.9 million. The Company does not anticipate making any material payments related to these guarantees.

As of December 31, 2009, the Company did not hold any stabilization reserves as collateral for certain properties owned by the LIHTC Funds, as the LIHTC Funds have met all of the criteria necessary to generate tax credits. Such criteria include completion of construction and the leasing of each unit to a qualified tenant, among others. Properties meeting the necessary criteria are considered to have “stabilized.” The properties are evaluated regularly, and the collateral is released when stabilized. During 2009, the stabilization reserve was not increased and the remainder of the stabilization reserve, $0.8 million, was released into income. In 2008, $0.8 million of the stabilization reserve was released into income.

To the extent there are cash deficits in any specific property owned by the LIHTC Funds, property reserves, property operating guarantees and reserves held by the LIHTC Funds are exhausted before the Company is required to perform under its guarantees. To the extent the Company is ever required to perform under its guarantees, it may recover any such funding out of the cash flow distributed from the sale of the underlying properties of the LIHTC Funds. This cash flow distribution would be paid to the Company prior to any cash flow distributions to unrelated third party investors.

(20) Variable Interest Entities  

In the normal course of business, the Company has relationships with variable interest entities (VIEs). The Company’s VIEs are conduits that assist the Company in structured products transactions involving the sale of LIHTC Funds to third party investors, other structured product issuances, and private equity investments.

The Company considers many factors when determining whether it is (or is not) the primary beneficiary of a VIE. There is a review of the entity’s contract and other deal related information, such as 1) the entity’s equity investment at risk, decision-making abilities, obligations to absorb economic risks and right to receive economic rewards of the entity, 2) whether the contractual or ownership interest in the entity changes with the change in fair value of the entity, and 3) the extent to which, through the variable interest, the Company shares in the entity’s expected losses and residual returns.

The Company was not required to provide financial or other support outside previous contractual requirements to any VIE.

NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES

(a wholly-owned subsidiary of Nationwide Financial Services, Inc.)

Notes to Consolidated Financial Statements, Continued

December 31, 2009, 2008 and 2007

LIHTC Funds

The Company provides guarantees to limited partners related to the amount of tax credits that will be generated by the funds (see Note 19). The results of operations and financial position of each VIE of which the Company is the primary beneficiary are consolidated along with corresponding noncontrolling interest in the accompanying consolidated financial statements.

The Company had relationships with 19 LIHTC Funds that are considered VIEs as of December 31, 2009 and December 31, 2008, where the Company was the primary beneficiary. Net assets of these consolidated VIEs were $350.6 million and $416.0 million as of December 31, 2009 and December 31, 2008, respectively. The following table summarizes the components of net assets as of December 31:

(in millions)	2009			2008
Other long-term investments	$	314.3		$	371.1
Short-term investments		16.4			20.9
Other assets		33.8			41.6
Other liabilities		(13.9	)		(17.6	)

The Company’s total loss exposure from consolidated VIEs was immaterial as of December 31, 2009 and December 31, 2008 (except for the impact of guarantees disclosed in Note 19). Creditors (or beneficial interest holders) of the consolidated VIEs have no recourse to the general credit of the Company.

These LIHTC Funds are financed through the sale of these funds into the secondary market. The proceeds from these sales are used to participate in low-income housing projects that provide tax benefits to the investors.

In addition to the consolidated VIEs described above, the Company holds variable interests in other LIHTC Funds that qualify as VIEs where the Company is not the primary beneficiary. The carrying amount of these unconsolidated VIEs was $110.0 million and $156.3 million as of December 31, 2009 and 2008, respectively. The total exposure to loss on these unconsolidated VIEs was $122.9 million and $179.6 million as of December 31, 2009 and 2008, respectively. The total exposure to loss is determined by adding any unfunded commitments to the carrying amount of the VIEs.

Structured Products

The Company had a relationship with one structured product investment that is considered a VIE as of December 31, 2009 and December 31, 2008, where the Company was the primary beneficiary. Net assets of this consolidated VIE were $9.2 million and $8.9 million as of December 31, 2009 and December 31, 2008, respectively. Creditors (or beneficial interest holders) of the consolidated VIE have no recourse to the general credit of the Company. There are no arrangements that would require the Company to provide financial support to the VIE.

The Company was invested in 7 and 12 structured product investments that are considered VIEs as of December 31, 2009 and 2008, respectively, where the Company is not the primary beneficiary. These structured products are in the form of synthetic collateralized debt obligations and collateralized lease obligations. The carrying amount on these unconsolidated VIEs was $31.8 million and $17.8 million as of December 31, 2009 and 2008, respectively. The total exposure to loss on these unconsolidated VIEs is determined to be the carrying amount of the VIEs.

NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES

(a wholly-owned subsidiary of Nationwide Financial Services, Inc.)

Notes to Consolidated Financial Statements, Continued

December 31, 2009, 2008 and 2007

Private Equity Investments

The Company had a relationship with one private equity investment that is considered a VIE as of December 31, 2008, where the Company was the primary beneficiary. On September 30, 2009, NLIC sold this private equity investment, which had net assets of $14.1 million, to NMIC.

(21) Segment Information  

Management views the Company’s business primarily based on its underlying products and uses this basis to define its four reportable segments: Individual Investments, Retirement Plans, Individual Protection, and Corporate and Other.

The primary segment profitability measure that management uses is pre-tax operating earnings (loss), which is calculated by adjusting income from continuing operations before federal income taxes and discontinued operations to exclude: (1) net realized investment gains and losses, except for operating items (periodic net amounts paid or received on interest rate swaps that do not qualify for hedge accounting treatment, net realized gains and losses related to hedges on GMDB contracts and securitizations); (2) other-than-temporary impairment losses; (3) the adjustment to amortization of DAC and VOBA related to net realized investment gains and losses; and (4) net loss attributable to noncontrolling interest.

Individual Investments

The Individual Investments segment consists of individual annuity products marketed under the The BEST of AMERICA®, Nationwide DestinationSM, and other Nationwide-specific or private label brands. Deferred annuity contracts provide the customer with tax-deferred accumulation of savings and flexible payout options including lump sum, systematic withdrawal or a stream of payments for life. In addition, deferred variable annuity contracts provide the customer with access to a wide range of investment options and asset protection features, while deferred fixed annuity contracts generate a return for the customer at a specified interest rate fixed for prescribed periods. Immediate annuities differ from deferred annuities in that the initial premium is exchanged for a stream of income for a certain period or for the owner’s lifetime without future access to the original investment. Portfolio income insurance is a form of deferred annuity that provides the income protection features common to today’s variable annuities to owners of specific managed account investments whose assets are outside of the annuity product. The majority of assets and recent sales for the Individual Investments segment consist of deferred variable annuities.

Retirement Plans

The Retirement Plans segment is comprised of the Company’s private and public sector retirement plans business. The private sector primarily includes Internal Revenue Code (IRC) Section 401 fixed and variable group annuity business, and the public sector primarily includes IRC Section 457 and Section 401(a) business in the form of full-service arrangements that provide plan administration and fixed and variable group annuities as well as administration-only business.

Individual Protection

The Individual Protection segment consists of investment life insurance products, including individual variable, COLI and BOLI products; traditional life insurance products; and universal life insurance products. Life insurance products provide a death benefit and generally allow the customer to build cash value on a tax-advantaged basis.

Corporate and Other

The Corporate and Other segment includes the MTN program; structured products business; non-operating realized gains and losses and related amortization, including mark-to-market adjustments on embedded derivatives, net of economic hedges, related to products with living benefits; and other revenues and expenses not allocated to other segments.

NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES

(a wholly-owned subsidiary of Nationwide Financial Services, Inc.)

Notes to Consolidated Financial Statements, Continued

December 31, 2009, 2008 and 2007

The following tables summarize the Company’s business segment operating results for the years ended December 31:

(in millions)	Individual Investments			Retirement Plans		Individual Protection		Corporate and Other			Total
2009
Revenues:
Policy charges	$	521.9		$	93.2	$	633.7	$	(3.7	)	$	1,245.1
Premiums		191.2			—		278.5		—			469.7
Net investment income		562.0			679.0		491.8		146.3			1,879.1
Non-operating net realized investment gains1		—			—		—		619.1			619.1
Other-than-temporary impairments losses		—			—		—		(574.6	)		(574.6	)
Other income2		(168.1	)		0.1		0.2		(1.4	)		(169.2	)
Total revenues		1,107.0			772.3		1,404.2		185.7			3,469.2
Benefits and expenses:
Interest credited to policyholder accounts		393.6			432.5		200.8		73.2			1,100.1
Benefits and claims		247.3			—		537.8		27.0			812.1
Policyholder dividends		—			—		87.0		—			87.0
Amortization of DAC		(1.4	)		44.5		158.1		264.4			465.6
Amortization of VOBA and other intangible assets		0.9			8.9		45.0		8.0			62.8
Interest expense		—			—		—		55.3			55.3
Other operating expenses		178.8			150.8		183.9		66.3			579.8
Total benefits and expenses		819.2			636.7		1,212.6		494.2			3,162.7
Income (loss) from continuing operations before federal income tax expense (benefit)		287.8			135.6		191.6		(308.5	)	$	306.5
Less: non-operating net realized investment gains1		—			—		—		(619.1	)
Less: non-operating other-than-temporary impairment losses		—			—		—		574.6
Less: adjustment to amortization related to net realized investment gains and losses		—			—		—		296.5
Less: net loss attributable to noncontrolling interest		—			—		—		52.3
Pre-tax operating earnings (loss)	$	287.8		$	135.6	$	191.6	$	(4.2	)
Assets as of year end	$	48,890.6		$	25,034.7	$	22,115.1	$	2,953.3		$	98,993.7

1 Excluding operating items (periodic net amounts paid or received on interest rate swaps that do not qualify for hedge accounting treatment and net realized gains and losses related to hedges on GMDB contracts and securitizations).  

2 Includes operating items discussed above.  

NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES

(a wholly-owned subsidiary of Nationwide Financial Services, Inc.)

Notes to Consolidated Financial Statements, Continued

December 31, 2009, 2008 and 2007

(in millions)	Individual Investments			Retirement Plans		Individual Protection		Corporate and Other			Total
2008
Revenues:
Policy charges	$	602.9		$	119.9	$	617.7	$	—		$	1,340.5
Premiums		120.2			—		273.9		—			394.1
Net investment income		530.4			650.7		485.8		197.8			1,864.7
Non-operating net realized investment losses1		—			—		—		(386.8	)		(386.8	)
Other-than-temporary impairments losses		—			—		—		(1,130.7	)		(1,130.7	)
Other income2		109.5			0.9		—		(75.6	)		34.8
Total revenues		1,363.0			771.5		1,377.4		(1,395.3	)		2,116.6
Benefits and expenses:
Interest credited to policyholder accounts		379.1			435.9		196.2		161.4			1,172.6
Benefits and claims		378.5			—		489.4		(11.8	)		856.1
Policyholder dividends		—			—		93.1		—			93.1
Amortization of DAC		647.7			40.6		129.9		(126.6	)		691.6
Amortization of VOBA and other intangible assets		7.8			1.3		22.1		(0.3	)		30.9
Interest expense		—			—		—		61.8			61.8
Other operating expenses		189.9			152.3		191.7		97.7			631.6
Total benefits and expenses		1,603.0			630.1		1,122.4		182.2			3,537.7
(Loss) income from continuing operations before federal income tax expense		(240.0	)		141.4		255.0		(1,577.5	)	$	(1,421.1	)
Less: non-operating net realized investment losses1		—			—		—		386.8
Less: non-operating other-than-temporary impairment losses		—			—		—		1,130.7
Less: adjustment to amortization related to net realized investment gains and losses		—			—		—		(139.2	)
Less: net loss attributable to noncontrolling interest		—			—		—		72.3
Pre-tax operating (loss) earnings	$	(240.0	)	$	141.4	$	255.0	$	(126.9	)
Assets as of year end	$	42,508.1		$	22,497.8	$	20,360.3	$	6,437.4		$	91,803.6

1 Excluding operating items (periodic net amounts paid or received on interest rate swaps that do not qualify for hedge accounting treatment and net realized gains and losses related to hedges on GMDB contracts and securitizations).  

2 Includes operating items discussed above.  

NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES

(a wholly-owned subsidiary of Nationwide Financial Services, Inc.)

Notes to Consolidated Financial Statements, Continued

December 31, 2009, 2008 and 2007

(in millions)	Individual Investments		Retirement Plans		Individual Protection		Corporate and Other			Total
2007
Revenues:
Policy charges	$	662.6	$	147.3	$	574.0	$	—		$	1,383.9
Premiums		133.3		—		273.7		—			407.0
Net investment income		642.9		655.0		471.2		423.1			2,192.2
Non-operating net realized investment losses1		—		—		—		(36.9	)		(36.9	)
Other-than-temporary impairments losses		—		—		—		(117.7	)		(117.7	)
Other income2		3.1		—		—		(4.5	)		(1.4	)
Total revenues		1,441.9		802.3		1,318.9		264.0			3,827.1
Benefits and expenses:
Interest credited to policyholder accounts		444.3		443.3		192.0		231.4			1,311.0
Benefits and claims		233.5		—		439.0		—			672.5
Policyholder dividends		—		—		83.1		—			83.1
Amortization of DAC		287.1		27.4		93.1		(25.5	)		382.1
Amortization of VOBA and other intangible assets		5.3		2.5		40.5		0.2			48.5
Interest expense		—		—		—		70.0			70.0
Other operating expenses		194.8		179.9		187.2		68.9			630.8
Total benefits and expenses		1,165.0		653.1		1,034.9		345.0			3,198.0
Income (loss) from continuing operations before federal income tax expense		276.9		149.2		284.0		(81.0	)	$	629.1
Less: non-operating net realized investment losses1		—		—		—		36.9
Less: non-operating other-than-temporary impairment losses		—		—		—		117.7
Less: adjustment to amortization related to net realized investment gains and losses		—		—		—		(25.5	)
Less: net loss attributable to noncontrolling interest		—		—		—		50.9
Pre-tax operating earnings	$	276.9	$	149.2	$	284.0	$	99.0
Assets as of year end	$	56,564.4	$	27,963.2	$	22,874.1	$	10,222.0		$	117,623.7

1 Excluding periodic net amounts paid or received on interest rate swaps that do not qualify for hedge accounting treatment and net realized gains and losses related to hedges on GMDB contracts and securitizations.  

2 Includes operating items discussed above.  

NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES

(a wholly-owned subsidiary of Nationwide Financial Services, Inc.)

Schedule I         Consolidated Summary of Investments – Other Than Investments in Related Parties

As of December 31, 2009 (in millions)

Column A	Column B		Column C		Column D
Type of investment	Cost		Market value		Amount at which shown in the consolidated balance sheet
Fixed maturity securities available-for-sale:
Bonds:
U.S. Treasury securities and obligations of U.S. Government corporations	$	136.7	$	151.1	$	151.1
U.S. Government agencies		551.3		602.8		602.8
Obligations of states and political subdivisions		567.6		548.9		548.9
Foreign governments		69.9		75.1		75.1
Public utilities		2,487.3		2,598.6		2,598.6
All other corporate		21,290.3		20,773.2		20,773.2
Total fixed maturity securities available-for-sale		25,103.1		24,749.7		24,749.7
Equity securities available-for-sale:
Common stocks:
Banks, trusts and insurance companies		28.2		31.5		31.5
Industrial, miscellaneous and all other		1.1		1.9		1.9
Nonredeemable preferred stocks		19.5		19.2		19.2
Total equity securities available-for-sale		48.8		52.6		52.6
Mortgage loans on real estate, net		6,916.4				6,829.0	1
Real estate, net:
Investment properties		11.4				8.9	2
Total real estate, net		11.4				8.9
Policy loans		1,050.4				1,050.4
Other long-term investments		457.5				457.5
Short-term investments, including amounts managed by a related party		1,003.4				1,003.4
Total investments	$	34,591.0			$	34,151.5

1 Difference from Column B primarily is attributable to valuation allowances due to impairments on mortgage loans on real estate (see Note 6 to the audited consolidated financial statements), hedges and commitment hedges on mortgage loans on real estate.  

2 Difference from Column B primarily results from adjustments for accumulated depreciation.  

See accompanying notes to consolidated financial statements and report of independent registered public accounting firm.

NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES

(a wholly-owned subsidiary of Nationwide Financial Services, Inc.)

Schedule III        Supplementary Insurance Information

As of December 31, 2009, 2008 and 2007 and for each of the years then ended (in millions)

Column A	Column B		Column C		Column D			Column E		Column F
Year: Segment	Deferred policy acquisition costs		Future policy benefits, losses, claims and loss expenses		Unearned premiums1			Other policy claims and benefits payable1		Premium revenue
2009
Individual Investments	$	1,911.5	$	10,870.4						$	191.2
Retirement Plans		270.6		11,702.4							—
Individual Protection		1,770.0		8,745.3							278.5
Corporate and Other		31.0		1,831.3
Total	$	3,983.1	$	33,149.4						$	469.7
2008
Individual Investments	$	1,883.0	$	12,476.8						$	120.2
Retirement Plans		290.1		11,497.5							—
Individual Protection		1,734.8		8,350.6							273.9
Corporate and Other		615.9		3,389.6							—
Total	$	4,523.8	$	35,714.5						$	394.1
2007
Individual Investments	$	2,078.1	$	11,316.4						$	133.3
Retirement Plans		292.9		10,973.1							—
Individual Protection		1,637.6		8,191.7							273.7
Corporate and Other		87.0		4,973.4							—
Total	$	4,095.6	$	35,454.6						$	407.0
Column A	Column G		Column H		Column I			Column J		Column K
Year: Segment	Net investment income2		Benefits, claims, losses and settlement expenses		Amortization of deferred policy acquisition costs			Other operating expenses2		Premiums written
2009
Individual Investments	$	562.0	$	640.9	$	(1.4	)	$	179.7
Retirement Plans		679.0		432.5		44.5			159.7
Individual Protection		491.8		825.6		158.1			228.9
Corporate and Other		146.3		100.2		264.4			129.6
Total	$	1,879.1	$	1,999.2	$	465.6		$	697.9
2008
Individual Investments	$	530.4	$	757.6	$	647.7		$	197.7
Retirement Plans		650.7		435.9		40.6			153.6
Individual Protection		485.8		778.7		129.9			213.8
Corporate and Other		197.8		149.6		(126.6	)		159.2
Total	$	1,864.7	$	2,121.8	$	691.6		$	724.3
2007
Individual Investments	$	642.9	$	677.8	$	287.1		$	200.1
Retirement Plans		655.0		443.3		27.4			182.4
Individual Protection		471.2		714.1		93.1			227.7
Corporate and Other		423.1		231.4		(25.5	)		139.1
Total	$	2,192.2	$	2,066.6	$	382.1		$	749.3

1 Unearned premiums and other policy claims and benefits payable are included in Column C amounts.  

2 Allocations of net investment income and certain operating expenses are based on numerous assumptions and estimates, and reported segment operating results would change if different methods were applied.  

See accompanying notes to consolidated financial statements and report of independent registered public accounting firm.

NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES

(a wholly-owned subsidiary of Nationwide Financial Services, Inc.)

Schedule IV        Reinsurance

As of December 31, 2009, 2008 and 2007 and for each of the years then ended (dollars in millions)

Column A	Column B		Column C		Column D		Column E		Column F
	Gross amount		Ceded to other companies		Assumed from other companies		Net amount		Percentage of amount assumed to net
2009
Life insurance in force	$	208,484.5	$	76,136.2	$	8.2	$	132,356.5	0.0%
Premiums:
Life insurance1	$	549.9	$	80.5	$	0.3	$	469.7	0.1%
Accident and health insurance		212.0		222.7		11.7		1.0	NM
Total	$	761.9	$	303.2	$	12.0	$	470.7	2.5%
2008
Life insurance in force	$	208,071.0	$	75,091.7	$	12.3	$	132,991.6	0.0%
Premiums:
Life insurance1	$	476.8	$	83.7	$	1.0	$	394.1	0.3%
Accident and health insurance		182.9		209.3		26.4		—	NM
Total	$	659.7	$	293.0	$	27.4	$	394.1	7.0%
2007
Life insurance in force	$	200,600.5	$	76,178.6	$	14.0	$	124,435.9	0.0%
Premiums:
Life insurance1	$	497.5	$	92.5	$	2.0	$	407.0	0.5%
Accident and health insurance		289.2		316.8		27.6		—	NM
Total	$	786.7	$	409.3	$	29.6	$	407.0	7.3%

1 Primarily represents premiums from traditional life insurance and life-contingent immediate annuities and excludes deposits on investment and universal life insurance products.  

See accompanying notes to consolidated financial statements and report of independent registered public accounting firm.

NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES

(a wholly-owned subsidiary of Nationwide Financial Services, Inc.)

Schedule V        Valuation and Qualifying Accounts

Years ended December 31, 2009, 2008 and 2007 (in millions)

Column A	Column B		Column C				Column D		Column E
Description	Balance at beginning of period		Charged (credited) to costs and expenses		Charged to other accounts		Deductions1		Balance at end of period
2009
Valuation allowances - mortgage loans on real estate	$	42.4	$	84.8	$	—	$	49.8	$	77.4
2008
Valuation allowances - mortgage loans on real estate	$	24.8	$	20.8	$	—	$	3.2	$	42.4
2007
Valuation allowances - mortgage loans on real estate	$	36.0	$	1.1	$	—	$	12.3	$	24.8

1 Amounts represent transfers to real estate owned, recoveries and sales to NMIC.  

See accompanying notes to consolidated financial statements and report of independent registered public accounting firm.

PART C

OTHER INFORMATION

Item 26.  Exhibits

(a) Board of Directors Resolutions

1. Resolution adopted by the Board of Directors of Provident Mutual Life Insurance Company authorizing establishment of the Provident Mutual Variable Growth Separate Account, Provident Mutual Variable Money Market Separate Account, Provident Mutual Variable Bond Separate Account, Provident Mutual Variable Managed Separate Account, and Provident Mutual Variable Zero Coupon Bond Separate Account. Incorporated herein by reference to Post-Effective Amendment No. 18, filed on May 1, 1998, File No. 33-2625.

2. Resolution of the Board of Directors of Provident Mutual Life Insurance Company establishing the Provident Mutual Variable Aggressive Growth Separate Account. Incorporated herein by reference to Post-Effective Amendment No. 18, filed on May 1, 1998, File No. 33-2625.

3. Resolution of the Board of Directors of Provident Mutual Life Insurance Company establishing the Provident Mutual Variable International Separate Account. Incorporated herein by reference to Post-Effective Amendment No. 18, filed on May 1, 1998, File No. 33-2625.

4. Resolution of the Board of Directors of Provident Mutual Life Insurance Company establishing the Provident Mutual Variable Separate Account. Incorporated herein by reference to Post-Effective Amendment No. 18, filed on May 1, 1998, File No. 33-2625.

5. Resolution of the Board of Directors of Provident Mutual Life Insurance Company Approving Creation of additional Subaccounts of Provident Mutual Variable Separate Account. Incorporated herein by reference to Post-Effective Amendment No. 18, filed on May 1, 1998, File No. 33-2625.

6. Resolution of the Board of Directors of Provident Mutual Life Insurance Company Approving Reorganization of the Provident Mutual Variable Growth Separate Account, Provident Mutual Variable Money Market Separate Account, Provident Mutual Variable Bond Separate Account, Provident Mutual Variable Zero Coupon Bond Separate Account, Provident Mutual Variable Aggressive Growth Separate Account, Provident Mutual Variable International Separate Account, Provident Mutual Variable Separate Account. Incorporated herein by reference to Post-Effective Amendment No. 1, filed on April 25, 2000, File No. 333-71763.

7. Resolution of the Board of Directors of Provident Mutual Life Insurance Company authorizing the filing of Registration Statements and Post-Effective Amendments. Incorporated herein by reference to the Initial Filing of the Registration Statement, filed on April 5, 2001, File No. 333-58308.

8. Resolution of the Board of Directors of Nationwide Life Insurance Company of America Approving Creation of Additional Subaccounts of Nationwide Provident VLI Separate Account 1. Incorporated herein by reference to Pre-Effective Amendment No. 1, filed on December 16, 2002, File No. 333-98629.

(b) Custodian Agreements.  Not applicable.

(c) Underwriting Contracts

1. Underwriting Agreement among Nationwide Life Insurance Company of America, Nationwide Life and Annuity Company of America, Nationwide Investment Services Corporation, and Nationwide Provident Variable Separate Accounts.  Incorporated herein by reference to Post-Effective Amendment No. 32, filed on April 29, 2009, File No. 33-2625.

2. Amendment to Underwriting Agreement. Incorporated herein by reference to Post-Effective Amendment No. 18, filed on May 1, 1998, File No. 33-2625.

3. Amendment to Underwriting Agreement. Incorporated herein by reference to Post-Effective Amendment No. 18, filed on May 1, 1998, File No. 33-2625.

4. Amendment to Underwriting Agreement. Incorporated herein by reference to Post-Effective Amendment No. 18, filed on May 1, 1998, File No. 33-2625.

5. Amendment to Underwriting Agreement. Incorporated herein by reference to Post-Effective Amendment No. 18, filed on May 1, 1998, File No. 33-2625.

6. Distribution Agreement by and among Nationwide Life Insurance Company of America, Nationwide Life and Annuity Company of America, and 1717 Capital Management Company.   Filed previously with initial registration statement 333-164118 on January 4, 2010 as document " exhibitc6,htm " and hereby incorporated by reference.

7. Assignment and Assumption of Distributor's Interest Under Distribution Agreement by and between Nationwide Securities, LLC and Nationwide Investment Services Corporation.   Filed previously with initial registration statement 333-164118 on January 4, 2010 as document " exhibitc7.htm " and hereby incorporated by reference.

(d) Contracts

1. Modified Premium Variable Life Insurance Policy Forms (C111, C111A, C112 & C112A). Incorporated herein by reference to Post-Effective Amendment No. 18, filed on May 1, 1998, File No. 33-2625.

2. Disability Waiver of Premium Rider – at issue (C545). Incorporated herein by reference to Post-Effective Amendment No. 18, filed on May 1, 1998, File No. 33-2625.

3. Disability Waiver of Premium Rider – after issue (C550). Incorporated herein by reference to Post-Effective Amendment No. 18, filed on May 1, 1998, File No. 33-2625.

4. Guaranteed Purchase Option Rider (C645). Incorporated herein by reference to Post-Effective Amendment No. 18, filed on May 1, 1998, File No. 33-2625.

5. Variable Loan Interest Rate Rider (C744VL). Incorporated herein by reference to Post-Effective Amendment No. 18, filed on May 1, 1998, File No. 33-2625.

6. Qualify as part of Section 403(b) Rider (C827). Incorporated herein by reference to Post-Effective Amendment No. 18, filed on May 1, 1998, File No. 33-2625.

7. Accelerated Death Benefit Rider (C/D904). Incorporated herein by reference to Post-Effective Amendment No. 18, filed on May 1, 1998, File No. 33-2625.

8. Change from Fixed to Variable Loan Interest Rate Rider (14918VL). Incorporated herein by reference to Post-Effective Amendment No. 18, filed on May 1, 1998, File No. 33-2625.

9. Increasing Death Benefit Rider (C310). Incorporated herein by reference to Post-Effective Amendment No. 18, filed on May 1, 1998, File No. 33-2625.

10. Form of Illustrations of Death Benefits, Cash Surrender Values and Accumulated Premiums.  Opinion and Consent of James Bernstein, Esquire. Incorporated herein by reference to Post-Effective Amendment No. 21, filed on April 23, 2001, File No. 33-2625.

(e) Applications

1. Form of Application. Incorporated herein by reference to Post-Effective Amendment No. 18, filed on May 1, 1998, File No. 33-2625.

2. Supplemental Application for Modified Premium. Incorporated herein by reference to Post-Effective Amendment No. 18, filed on May 1, 1998, File No. 33-2625.

3. Initial Allocation Selection. Incorporated herein by reference to Post-Effective Amendment No. 18, filed on May 1, 1998, File No. 33-2625.

(f) Depositor's Certificate of Incorporation and By-Laws

1. Amended Articles of Incorporation for Nationwide Life Insurance Company.   Previously filed with initial registration statement 333-164118 on January 4, 2010 as document "exhibitf1.htm" and hereby incorporated by reference.

2. Amended and Restated Code of Regulations of Nationwide Life Insurance Company.   Previously filed with initial registration statement 333-164118 on January 4, 2010 as document "exhibitf2.htm" and hereby incorporated by reference.

3. Articles of Merger of Nationwide Life Insurance Company of America with and into Nationwide Life Insurance Company, effective December 31, 2009. Previously filed with initial registration statement 333-164118 on January 4, 2010 as document "exhibitf3.htm" and hereby incorporated by reference.

(g) Reinsurance Contracts

1. Single Life Permanent Pool (ERC). Incorporated herein by reference to Pre-Effective Amendment No. 1, filed on December 16, 2002, File No. 333-98629.

2. Single Life Permanent Pool (RGA). Incorporated herein by reference to Pre-Effective Amendment No. 1, filed on December 16, 2002, File No. 333-98629.

3. Automatic and Facultative YRT Reinsurance Agreement between Provident Mutual Life Insurance Company, Provident Mutual Life and Annuity Company of America, and RGA Reinsurance Company. Incorporated herein by reference to Pre-Effective Amendment No. 1, filed on December 16, 2002, File No. 333-98629.

4. Addendum to the Automatic and Facultative Reinsurance Agreement between Provident Mutual Life Insurance Company, Providentmutual Life and Annuity Company of America, and RGA Reinsurance Company. Incorporated herein by reference to Pre-Effective Amendment No. 1, filed on December 16, 2002, File No. 333-98629.

5. Automatic Reinsurance Agreement No. 2727 between Provident Mutual Life Insurance Company and Phoenix Home Life Mutual Insurance Company. Incorporated herein by reference to Pre-Effective Amendment No. 1, filed on December 16, 2002, File No. 333-98629.

6. Amendment Number 3 to the Reinsurance Agreement No. 2727 between Provident Mutual Life Insurance Company and ERC Life Reinsurance Corporation. Incorporated herein by reference to Pre-Effective Amendment No. 1, filed on December 16, 2002, File No. 333-98629.

7. Amendment Number 4 to the Reinsurance Agreement No. 2727 between Provident Mutual Life Insurance Company and ERC Life Reinsurance Corporation. Incorporated herein by reference to Pre-Effective Amendment No. 1, filed on December 16, 2002, File No. 333-98629.

8. Automatic Yearly Renewable Term Reinsurance Agreement No. P226-105 between Provident Mutual Life Insurance Company and General & Cologne Life Re of America. Incorporated herein by reference to Pre-Effective Amendment No. 1, filed on December 16, 2002, File No. 333-98629.

9. Automatic Yearly Renewable Term Reinsurance Agreement No. P226-106 between Provident Mutual Life Insurance Company and General & Cologne Life Re of America. Incorporated herein by reference to Pre-Effective Amendment No. 1, filed on December 16, 2002, File No. 333-98629.

10. YRT Agreement No. 5918-14 between Provident Mutual Life Insurance Company and AUSA Life Insurance Company, Inc. Incorporated herein by reference to Pre-Effective Amendment No. 1, filed on December 16, 2002, File No. 333-98629.

11. YRT Agreement No. 5918-15 between Provident Mutual Life Insurance Company and AUSA Life Insurance Company, Inc. Incorporated herein by reference to Pre-Effective Amendment No. 1, filed on December 16, 2002, File No. 333-98629.

(h) Participation Agreements.

1. Fund Participation Agreement with Fred Alger Management, Inc. and Fred Alger & Company, Inc., dated October 1, 2003.  Incorporated herein by reference to corresponding exhibits to post-effective amendment number 10 to the Form N-4 registration statement (File No. 333-105992) for Nationwide Life Insurance Company, filed on April 18, 2008.

2. Fund Participation Agreement with Fidelity Variable Insurance Products Fund dated May 1, 1988, as amended, including Fidelity Variable Insurance Products Fund IV and Fidelity Variable Insurance Products Fund V.  Incorporated herein by reference to Pre-Effective Amendment no. 1, filed on July 17, 2007, File No. 333-140608.

3. Fund Participation Agreement with Nationwide Variable Insurance Trust (formerly, Gartmore Variable Insurance Trust) dated February 1, 2003, as amended.  Incorporated herein by reference to Pre-Effective Amendment no. 1, filed on July 17, 2007, File No. 333-140608.

4. Fund Participation Agreement with Neuberger Berman Advisers Management Trust / Lehman Brothers Advisers Management Trust (formerly, Neuberger Berman Advisers Management Trust) dated January 1, 2006.  Incorporated herein by reference to Pre-Effective Amendment no. 1, filed on July 17, 2007, File No. 333-140608.

5. Fund Participation Agreement Van Eck Investment Trust, Van Eck Associates Corporation, Van Eck Securities Corporation dated September 1, 1989, as amended.  Incorporated herein by reference to Pre-Effective Amendment no. 3, filed on September 27, 2007, File No. 333-137202.

(i) Administrative Contracts.  Not applicable.

(j) Other Material Contracts.  Not applicable.

(k) Legal Opinion.   Filed previously with initial registration statement 333-164118 on January 4, 2010 as document " exhibitk.htm " and hereby incorporated by reference.

(l) Actuarial Opinion.  Not applicable.

(m) Calculations.  Not applicable.

(n) Consent of Independent Registered Public Accounting Firm.  Attached hereto.

(o) Omitted Financial Statements.  Not applicable.

(p) Initial Capital Agreements.  Not applicable.

(q) Redeemability Exemption.   Attached hereto as document " Item 26q.htm. "'

(99) Power of Attorney. Attached hereto.

Item 27.                 Directors and Officers of the Depositor

President and Chief Operating Officer and Director	Kirt A. Walker
Executive Vice President and Chief Legal and Governance Officer	Patricia R. Hatler
Executive Vice President-Chief Administrative Officer	Terri L. Hill
Executive Vice President-Chief Human Resources Officer	Gale V. King
Executive Vice President-Chief Information Officer	Michael C. Keller
Executive Vice President-Chief Marketing Officer	James R. Lyski
Executive Vice President-Chief Investment Officer	Gail G. Snyder
Executive Vice President-Finance	Lawrence A. Hilsheimer
Executive Vice President	Mark A. Pizzi
Executive Vice President and Director	Mark R. Thresher
Senior Vice President and Treasurer	Harry H. Hallowell
Senior Vice President-Associate Services	Robert J. Puccio
Senior Vice President-Business Transformation Office	Gregory S. Moran
Senior Vice President-Chief Compliance Officer	Carol Baldwin Moody
Senior Vice President-Chief Financial Officer and Director	Timothy G. Frommeyer
Senior Vice President-Chief Litigation Counsel	Randolph C. Wiseman
Senior Vice President-Chief Risk Officer	Michael W. Mahaffey
Senior Vice President-CIO IT Infrastructure	Robert J. Dickson
Senior Vice President-Customer Insight/Analytic	Paul D. Ballew
Senior Vice President-Customer Relationships	David R. Jahn
Senior Vice President-Division General Counsel	Roger A. Craig
Senior Vice President-Division General Counsel	Thomas W. Dietrich
Senior Vice President-Division General Counsel	Sandra L. Neely
Senior Vice President-Government Relations	Jeffrey D. Rouch
Senior Vice President-Head of Taxation	Pamela A. Biesecker
Senior Vice President-Human Resources	Kim R. Geyer
Senior Vice President-Individual Investments Business Head	Eric S. Henderson
Senior Vice President-Individual Protection Business Head and Director	Peter A. Golato
Senior Vice President-PCIO Information Technology	Srinivas Koushik
Senior Vice President-NF Marketing	Gordon E. Hecker
Senior Vice President-CIO NF Systems	Susan Gueli
Senior Vice President, Chief Financial Officer – Property and Casualty	Michael P. Leach
Senior Vice President-Distribution and Sales	John L. Carter
Senior Vice President-President – NW Retirement Plans	Anne L. Arvia
Senior Vice President-President-Investment Management Group	Michael S. Spangler
Senior Vice President-Property and Casualty Commercial/Farm Product Pricing	W. Kim Austen
Senior Vice President-Human Resources	Kim R. Geyer
Senior Vice President-Marketing Services	Jennifer M. Hanley
Senior Vice President-Property and Casualty Personal Lines Product Pricing	J. Lynn Greenstein
Senior Vice President-Property and Casualty/Farm Product Pricing	James R. Burke
Senior Vice President – Internal Audit	Kai V. Monahan
Senior Vice President	Matthew Jauchius
Vice President – Corporate Governance and Secretary	Robert W. Horner, III
Director	Stephen S. Rasmussen

Principal business address is One Nationwide Plaza, Columbus, OH 43215.

Item 28.                 Persons Controlled by or Under Common Control with the Depositor or Registrant.

*	Subsidiaries for which separate financial statements are filed
**	Subsidiaries included in the respective consolidated financial statements
***	Subsidiaries included in the respective group financial statements filed for unconsolidated subsidiaries
****	Other subsidiaries

COMPANY	STATE/COUNTRY OF ORGANIZATION	NO. VOTING SECURITIES (see attached chart unless otherwise indicated)	PRINCIPAL BUSINESS
1492 Capital, LLC	Ohio		The company acts as an investment holding company.
1717 Brokerage Services, Inc.	Pennsylvania		The company is a multi-state licensed insurance agency.
AGMC Reinsurance, Ltd.	Turks & Caicos Islands		The company is in the business of reinsurance of mortgage guaranty risks.
ALLIED General Agency Company	Iowa		The company acts as a managing general agent and surplus lines broker for property and casualty insurance products.
ALLIED Group, Inc.	Iowa		The company is a property and casualty insurance holding company.
ALLIED Property and Casualty Insurance Company	Iowa		The company underwrites general property and casualty insurance.
ALLIED Texas Agency, Inc.	Texas		The company acts as a managing general agent to place personal and commercial automobile insurance with Colonial County Mutual Insurance Company for the independent agency companies.
AMCO Insurance Company	Iowa		The company underwrites general property and casualty insurance.
American Marine Underwriters, Inc.	Florida		The company is an underwriting manager for ocean cargo and hull insurance.
Atlantic Floridian Insurance Company	Ohio		The company writes personal lines residential property insurance in the State of Florida.
Freedom Specialty Insurance Company	Ohio		The company operates as a multi-line insurance company.
Audenstar Limited	England		The company is an investment holding company.
Champions of the Community, Inc.	Ohio		The company raises money to enable it to make gifts and grants to charitable organizations.
Colonial County Mutual Insurance Company*	Texas		The company underwrites non-standard automobile and motorcycle insurance and various other commercial liability coverages in Texas.
Crestbrook Insurance Company*	Ohio		The company is an Ohio-based multi-line insurance corporation that is authorized to write personal, automobile, homeowners and commercial insurance.
Depositors Insurance Company	Iowa		The company underwrites general property and casualty insurance.

COMPANY	STATE/COUNTRY OF ORGANIZATION	NO. VOTING SECURITIES (see attached chart unless otherwise indicated)	PRINCIPAL BUSINESS
DVM Insurance Agency, Inc.	California		The company places pet insurance business not written by Veterinary Pet Insurance Company outside of California with National Casualty Company.
Farmland Mutual Insurance Company	Iowa		The company provides property and casualty insurance primarily to agricultural businesses.
Nationwide Better Health, Inc.  (fka Future Health Holding Company)	Maryland		The company provides population health management.
Gates, McDonald & Company*	Ohio		The company provides services to employers for managing workers ' and unemployment compensation matters and employee leave administration.
Gates, McDonald & Company of New York, Inc.	New York		The company provides workers ' compensation and self-insured claims administration services to employers with exposure in New York.
GatesMcDonald Health Plus Inc.	Ohio		The company provides medical management and cost containment services to employers.
Insurance Intermediaries, Inc.	Ohio		The company is an insurance agency and provides commercial property and casualty brokerage services.
Life REO Holdings, LLC	Ohio		The company is an investment company.
Lone Star General Agency, Inc.	Texas		The company acts as general agent to market nonstandard automobile and motorcycle insurance for Colonial County Mutual Insurance Company.
National Casualty Company	Wisconsin		The company underwrites various property and casualty coverage, as well as some individual and group accident and health insurance.
National Casualty Company of America, Ltd.	England		This is a limited liability company organized for the purpose of carrying on the business of insurance, reinsurance, indemnity, and guarantee of various kinds.  The company is currently inactive.
Nationwide Advantage Mortgage Company*	Iowa		The company makes residential mortgage loans.
Nationwide Affinity Insurance Company of America*	Ohio		The company is a property and casualty insurer that writes personal lines business.
Nationwide Agribusiness Insurance Company	Iowa		The company provides property and casualty insurance primarily to agricultural businesses.
Nationwide Arena, LLC*	Ohio		The purpose of the company is to develop Nationwide Arena and to engage in related development activity.
Nationwide Asset Management Holdings	England and Wales		The company operates as an investment holding company.
Nationwide Asset Management, LLC	Ohio		The company provides investment advisory services as a registered investment advisor to affiliated and non-affiliated clients.

COMPANY	STATE/COUNTRY OF ORGANIZATION	NO. VOTING SECURITIES (see attached chart unless otherwise indicated)	PRINCIPAL BUSINESS
Nationwide Assurance Company	Wisconsin		The company underwrites non-standard automobile and motorcycle insurance.
Nationwide Bank*	United States		This is a federal savings bank chartered by the Office of Thrift Supervision in the United States Department of Treasury to exercise deposit, lending, agency, custody and fiduciary powers and to engage in activities permissible for federal savings banks under the Home Owners ' Loan Act of 1933.
Nationwide Better Health Holding Company (fka Nationwide Better Health, Inc.)	Ohio		The company provides health management services.
Nationwide Cash Management Company	Ohio		The company buys and sells investment securities of a short-term nature as the agent for other corporations, foundations and insurance company separate accounts.
Nationwide Community Development Corporation, LLC	Ohio		The company holds investments in low-income housing funds.
Nationwide Corporation	Ohio		The company acts primarily as a holding company for entities affiliated with Nationwide Mutual Insurance.
Nationwide Emerging Managers, LLC	Delaware		The company acquires and holds interests in registered investment advisors and provides investment management services.
Nationwide Exclusive Agent Risk Purchasing Group, LLC	Ohio		The company ' s purpose is to provide a mechanism for the purchase of group liability insurance for insurance agents operating nationwide.
Nationwide Financial Assignment Company	Ohio		The company is an administrator of structured settlements.
Nationwide Financial Institution Distributors Agency, Inc.	Delaware		The company is an insurance agency.
Nationwide Financial Services Capital Trust	Delaware		The trust ' s sole purpose is to issue and sell certain securities representing individual beneficial interests in the assets of the trust.
Nationwide Financial Services, Inc.*	Delaware		The company acts primarily as a holding company for companies within the Nationwide organization that offer or distribute long-term savings and retirement products.
Nationwide Financial Structured Products, LLC	Ohio		The company captures and reports the results of the structured products business unit.
Nationwide Foundation*	Ohio		The company contributes to non-profit activities and projects.
Nationwide Fund Advisors (fka Gartmore Mutual Fund Capital Trust)	Delaware		The trust acts as a registered investment advisor.

COMPANY	STATE/COUNTRY OF ORGANIZATION	NO. VOTING SECURITIES (see attached chart unless otherwise indicated)	PRINCIPAL BUSINESS
Nationwide Fund Distributors LLC (successor to Gartmore Distribution Services, Inc.)	Delaware		The company is a limited purpose broker-dealer.
Nationwide Fund Management LLC (successor to Gartmore Investors Services, Inc.)	Delaware		The company provides administration, transfer and dividend disbursing agent services to various mutual fund entities.
Nationwide General Insurance Company	Ohio		The company transacts a general insurance business, except life insurance, and primarily provides automobile and fire insurance to select customers.
Nationwide Global Funds	Luxembourg		The exclusive purpose of the Company is to invest the funds available to it in transferable securities and other assets permitted by law with the aim of spreading investment risks and affording its shareholders the results of the management of its assets.
Nationwide Global Holdings, Inc.	Ohio		The company is a holding company for the international operations of Nationwide.
Nationwide Global Ventures, Inc.	Delaware		The company acts as a holding company.
Nationwide Indemnity Company*	Ohio		The company is involved in the reinsurance business by assuming business from Nationwide Mutual Insurance Company and other insurers within the Nationwide insurance organization.
Nationwide Insurance Company of America	Wisconsin		The company is an independent agency personal lines underwriter of property and casualty insurance.
Nationwide Insurance Company of Florida*	Ohio		The company transacts general insurance business, except life insurance.
Nationwide International Underwriters	California		The company is a special risks, excess and surplus lines under­writing manager.
Nationwide Investment Advisors, LLC	Ohio		The company provides investment advisory services.
Nationwide Investment Services Corporation**	Oklahoma		This is a limited purpose broker-dealer and distributor of variable annuities and variable life products for Nationwide Life Insurance Company and Nationwide Life and Annuity Insurance Company. The company also provides educational services to retirement plan sponsors and its participants.
Nationwide Life and Annuity Insurance Company**	Ohio		The company engages in underwriting life insurance and granting, purchasing and disposing of annuities.
Nationwide Life Insurance Company*	Ohio		The company pro­vides individual life insurance, group life and health insurance, fixed and variable annuity products and other life insurance products.

COMPANY	STATE/COUNTRY OF ORGANIZATION	NO. VOTING SECURITIES (see attached chart unless otherwise indicated)	PRINCIPAL BUSINESS
Nationwide Lloyds	Texas		The company markets commercial and property insurance in Texas.
Nationwide Mutual Capital, LLC	Ohio		The company acts as a private equity fund investing in companies for investment purposes and to create strategic opportunities for Nationwide.
Nationwide Mutual Capital I, LLC*	Delaware		The business of the company is to achieve long term capital appreciation through a portfolio of primarily domestic equity investments in financial service and related companies.
Nationwide Mutual Fire Insurance Company	Ohio		The company engages in a general insurance and reinsurance business, except life insurance.
Nationwide Mutual Insurance Company*	Ohio		The company engages in a general insurance and reinsurance business, except life insurance.
Nationwide Private Equity Fund, LLC	Ohio		The company invests in private equity funds.
Nationwide Property and Casualty Insurance Company	Ohio		The company engages in a general insurance business, except life insurance.
Nationwide Property Protection Services, LLC	Ohio		The company provides alarm systems and security guard services.
Nationwide Realty Services, Ltd.	Ohio		The company provides relocation services for associates.
Nationwide Realty Investors, Ltd.*	Ohio		The company is engaged in the business of developing, owning and operating real estate and real estate investment.
Nationwide Retirement Solutions, Inc.*	Delaware		The company markets and administers deferred compensation plans for public employees.
Nationwide Retirement Solutions, Inc. of Arizona	Arizona		The company markets and administers deferred compensation plans for public employees.
Nationwide Retirement Solutions, Inc. of Ohio	Ohio		The company provides retirement products, marketing, education and administration to public employees.
Nationwide Retirement Solutions, Inc. of Texas	Texas		The company markets and administers deferred compensation plans for public employees.
Nationwide Retirement Solutions, Insurance Agency, Inc.	Massachusetts		The company markets and administers deferred compensation plans for public employees.
Nationwide SA Capital Trust	Delaware		The trust acts as a registered investment advisor.
Nationwide Sales Solutions, Inc.	Iowa		The company engages in the direct marketing of property and casualty insurance products.
Nationwide Securities, LLC	Delaware		The company is a registered broker-dealer and provides investment management and administrative services.

COMPANY	STATE/COUNTRY OF ORGANIZATION	NO. VOTING SECURITIES (see attached chart unless otherwise indicated)	PRINCIPAL BUSINESS
Nationwide Separate Accounts, LLC	Delaware		The company has deregistered as an investment advisor and acts as a holding company.
Nationwide Services Company, LLC	Ohio		The company performs shared services functions for the Nationwide organization.
Newhouse Capital Partners, LLC	Delaware		The company is an investment holding company.
Newhouse Capital Partners II, LLC	Delaware		The company is an investment holding company.
NF Reinsurance Ltd.*	Bermuda		The company serves as a captive reinsurer for Nationwide Life Insurance Company ' s universal life, term life and annuity business.
NFS Distributors, Inc.	Delaware		The company acts primarily as a holding company for Nationwide Financial Services, Inc. ' s distribution companies.
NMC CPC WT Investment, LLC	Delaware		The business of the company is to hold and exercise rights in a specific private equity investment.
NWD Asset Management Holdings, Inc.	Delaware		The company is an investment holding company.
NWD Investment Management, Inc.	Delaware		The company acts as a holding company and provides other business services for the NWD Investments group of companies.
NWD Management & Research Trust	Delaware		The company acts as a holding company for the NWD Investments group of companies and as a registered investment advisor.
NWD MGT, LLC	Delaware		The company is a passive investment holder in Newhouse Special Situations Fund I, LLC for the purpose of allocation of earnings to the NWD Investments management team as it relates to the ownership and management of Newhouse Special Situations Fund I, LLC.
Pension Associates, Inc.	Wisconsin		The company provides pension plan administration and record keeping services, and pension plan and compensation consulting.
Premier Agency, Inc.	Iowa		The company is an insurance agency.
Privilege Underwriters, Inc.	Florida		The company acts as a holding company for the PURE Group of insurance companies.
Privilege Underwriters, Reciprocal Exchange	Florida		The company acts as a reciprocal insurance company.

COMPANY	STATE/COUNTRY OF ORGANIZATION	NO. VOTING SECURITIES (see attached chart unless otherwise indicated)	PRINCIPAL BUSINESS
Pure Insurance Company	Florida		The company acts as a captive reinsurance company.
Pure Risk Management, LLC	Florida		The company acts as an attorney-in-fact for Privilege Underwriters Reciprocal Exchange.
Registered Investment Advisors Services, Inc.	Texas		The company is a technology company that facilitates third-party money management services for registered investment advisors.
Retention Alternatives, Ltd.*	Bermuda		The company is a captive insurer and writes first dollar insurance policies in workers ' compensation, general liability and automobile liability for its affiliates in the United States.
Riverview International Group, Inc.	Delaware		The company is an insurance company.
RP&C International, Inc.	Ohio		The company is an investment-banking firm that provides specialist advisory services and innovative financial solutions to public and private companies internationally.
Scottsdale Indemnity Company	Ohio		The company is engaged in a general insurance business, except life insurance.
Scottsdale Insurance Company	Ohio		The company primarily provides excess and surplus lines of property and casualty insurance.
Scottsdale Surplus Lines Insurance Company	Arizona		The company provides excess and surplus lines coverage on a non-admitted basis.
THI Holdings (Delaware), Inc.*	Delaware		The company acts as a holding company for subsidiaries of the Nationwide group of companies.
Titan Auto Insurance of New Mexico, Inc.	New Mexico		The company is an insurance agency that operates employee agent storefronts.
Titan Indemnity Company	Texas		The company is a multi-line insurance company and is operating primarily as a property and casualty insurance company.
Titan Insurance Company	Michigan		The company is a property and casualty insurance company.
Titan Insurance Services, Inc.	Texas		The company is a Texas grandfathered managing general agency.
Veterinary Pet Insurance Company*	California		The company provides pet insurance.
Victoria Automobile Insurance Company	Indiana		The company is a property and casualty insurance company.
Victoria Fire & Casualty Company	Ohio		The company is a property and casualty insurance company.
Victoria National Insurance Company	Ohio		The company is a property and casualty insurance company.
Victoria Select Insurance Company	Ohio		The company is a property and casualty insurance company.
Victoria Specialty Insurance Company	Ohio		The company is a property and casualty insurance company.

COMPANY	STATE/COUNTRY OF ORGANIZATION	NO. VOTING SECURITIES (see attached chart unless otherwise indicated)	PRINCIPAL BUSINESS
VPI Services, Inc.	California		The company operates as a nationwide pet registry service for holders of Veterinary Pet Insurance Company policies, including pet indemnification and a lost pet recovery program.
Western Heritage Insurance Company	Arizona		The company underwrites excess and surplus lines of property and casualty insurance.
Whitehall Holdings, Inc.	Texas		The company acts as a holding company for the Titan group of agencies.
W.I. of Florida (d.b.a. Titan Auto Insurance)	Florida		The company is an insurance agency and operates as an employee agent storefront for Titan Indemnity Company in Florida.

	COMPANY	STATE/COUNTRY OF ORGANIZATION	NO. VOTING SECURITIES (see attached chart  unless otherwise indicated)	PRINCIPAL BUSINESS
*	MFS Variable Account	Ohio		Issuer of Annuity Contracts
*	Nationwide Multi-Flex Variable Account	Ohio		Issuer of Annuity Contracts
*	Nationwide VA Separate Account-A	Ohio		Issuer of Annuity Contracts
*	Nationwide VA Separate Account-B	Ohio		Issuer of Annuity Contracts
*	Nationwide VA Separate Account-C	Ohio		Issuer of Annuity Contracts
*	Nationwide VA Separate Account-D	Ohio		Issuer of Annuity Contracts
*	Nationwide Variable Account	Ohio		Issuer of Annuity Contracts
*	Nationwide Variable Account-II	Ohio		Issuer of Annuity Contracts
*	Nationwide Variable Account-3	Ohio		Issuer of Annuity Contracts
*	Nationwide Variable Account-4	Ohio		Issuer of Annuity Contracts
*	Nationwide Variable Account-5	Ohio		Issuer of Annuity Contracts
*	Nationwide Variable Account-6	Ohio		Issuer of Annuity Contracts
*	Nationwide Variable Account-7	Ohio		Issuer of Annuity Contracts
*	Nationwide Variable Account-8	Ohio		Issuer of Annuity Contracts
*	Nationwide Variable Account-9	Ohio		Issuer of Annuity Contracts
*	Nationwide Variable Account-10	Ohio		Issuer of Annuity Contracts
*	Nationwide Variable Account-11	Ohio		Issuer of Annuity Contracts
*	Nationwide Variable Account-12	Ohio		Issuer of Annuity Contracts
*	Nationwide Variable Account-13	Ohio		Issuer of Annuity Contracts
*	Nationwide Variable Account-14	Ohio		Issuer of Annuity Contracts
	Nationwide Variable Account-15	Ohio		Issuer of Annuity Contracts
	Nationwide Variable Account-16	Ohio		Issuer of Annuity Contracts
	Nationwide Variable Account-17	Ohio		Issuer of Annuity Contracts
*	Nationwide Provident VA Separate Account 1	Pennsylvania		Issuer of Annuity Contracts
*	Nationwide Provident VA Separate Account A	Delaware		Issuer of Annuity Contracts
	Nationwide VL Separate Account-A	Ohio		Issuer of Life Insurance Policies
	Nationwide VL Separate Account-B	Ohio		Issuer of Life Insurance Policies
*	Nationwide VL Separate Account-C	Ohio		Issuer of Life Insurance Policies
*	Nationwide VL Separate Account-D	Ohio		Issuer of Life Insurance Policies
*	Nationwide VL Separate Account-G	Ohio		Issuer of Life Insurance Policies
*	Nationwide VLI Separate Account	Ohio		Issuer of Life Insurance Policies

	COMPANY	STATE/COUNTRY OF ORGANIZATION	NO. VOTING SECURITIES (see attached chart  unless otherwise indicated)	PRINCIPAL BUSINESS
*	Nationwide VLI Separate Account-2	Ohio		Issuer of Life Insurance Policies
*	Nationwide VLI Separate Account-3	Ohio		Issuer of Life Insurance Policies
*	Nationwide VLI Separate Account-4	Ohio		Issuer of Life Insurance Policies
*	Nationwide VLI Separate Account-5	Ohio		Issuer of Life Insurance Policies
*	Nationwide VLI Separate Account-6	Ohio		Issuer of Life Insurance Policies
*	Nationwide VLI Separate Account-7	Ohio		Issuer of Life Insurance Policies
*	Nationwide Provident VLI Separate Account 1	Pennsylvania		Issuer of Life Insurance Policies
*	Nationwide Provident VLI Separate Account A	Delaware		Issuer of Life Insurance Policies

Item 29.  Indemnification

Ohio's General Corporation Law expressly authorizes and Nationwide Life Insurance Company's Amended and Restated Code of Regulations provides for indemnification by Nationwide Life Insurance Company of any person who, because such person is or was a director, officer or employee of Nationwide Life Insurance Company was or is a party; or is threatened to be made a party to:

o   any threatened, pending or completed civil action, suit or proceeding;

o   any threatened, pending or completed criminal action, suit or proceeding;

o   any threatened, pending or completed administrative action or proceeding;

o   any threatened, pending or completed investigative action or proceeding.

The indemnification will be for actual and reasonable expenses, including attorney's fees, judgments, fines and amounts paid in settlement by such person in connection with such action, suit or proceeding, to the extent and under the circumstances permitted by the Ohio's General Corporation Law.

Although Nationwide Life Insurance Company is of the opinion that the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding is permitted, Nationwide Life Insurance Company has been informed that in the opinion of the Securities and Exchange Commission the indemnification of directors, officers or persons controlling Nationwide Life Insurance Company for liabilities arising under the Securities Act of 1933 ("Act") is against public policy as expressed in the Act and is, therefore, unenforceable.  In the event that a claim for indemnification against such liabilities is asserted by a director, officer or controlling person in connection with the securities being registered, the registrant will submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act. Nationwide Life Insurance Company and the directors, officers and/or controlling persons will be governed by the final adjudication of such issue.  Nationwide Life Insurance Company will not be required to seek the court's determination if, in the opinion of Nationwide Life Insurance Company's counsel, the matter has been settled by controlling precedent.

Item 30.  Principal Underwriter

(a) Nationwide Investment Services Corporation ("NISC") serves as principal underwriter and general distributor for the following separate investment accounts of NLIC or its affiliates:

MFS Variable Account	Nationwide VLI Separate Account
Multi-Flex Variable Account	Nationwide VLI Separate Account-2
Nationwide Variable Account	Nationwide VLI Separate Account-3
Nationwide Variable Account-II	Nationwide VLI Separate Account-4
Nationwide Variable Account-3	Nationwide VLI Separate Account-5
Nationwide Variable Account-4	Nationwide VLI Separate Account-6
Nationwide Variable Account-5	Nationwide VLI Separate Account-7
Nationwide Variable Account-6	Nationwide VL Separate Account-C
Nationwide Variable Account-7	Nationwide VL Separate Account-D
Nationwide Variable Account-8	Nationwide VL Separate Account-G
Nationwide Variable Account-9	Nationwide Provident VA Separate Account 1
Nationwide Variable Account-10	Nationwide Provident VA Separate Account A
Nationwide Variable Account-11	Nationwide Provident VLI Separate Account 1
Nationwide Variable Account-12	Nationwide Provident VLI Separate Account A
Nationwide Variable Account-13
Nationwide Variable Account-14
Nationwide VA Separate Account-A
Nationwide VA Separate Account-B
Nationwide VA Separate Account-C
Nationwide VA Separate Account-D

(b) Directors and Officers of NISC:

President	Robert O. Cline
Senior Vice President, Treasurer and Director	James D. Benson
Vice President-Chief Compliance Officer	James J. Rabenstine
Associate Vice President and Secretary	Kathy R. Richards
Associate Vice President-Financial Systems & Treasury Services and Assistant Treasurer	Terry C. Smetzer
Associate Vice President	John J. Humphries, Jr.
Assistant Secretary	Mark E. Hartman
Director	John L. Carter
Director	Eric S. Henderson

The business address of the Directors and Officers of Nationwide Investment Services Corporation is:

 One Nationwide Plaza, Columbus, Ohio 43215

(c)

Name of Principal Underwriter	Net Underwriting Discounts and Commissions	Compensation on Redemption	Brokerage Commissions	Compensation
Nationwide Investment Services Corporation	N/A	N/A	N/A	N/A

Item 31.  Location of Accounts and Records

Timothy G. Frommeyer

Nationwide Life Insurance Company

One Nationwide Plaza

Columbus, OH  43215

Item 32.  Management Services

All management contracts are discussed in Part A or Part B.

Item 33.  Fee Representation

Nationwide Life Insurance Company hereby represents that the fees and charges deducted under the Policy, in the aggregate, are reasonable in relation to the services rendered, the expenses expected to be incurred, and the risks assumed by Nationwide Life Insurance Company.

SIGNATURES

As required by the Securities Act of 1933, and the Investment Company Act of 1940, the Registrant, Nationwide Provident VLI Separate Account 1, certifies that it meets the requirement of the Securities Act Rule 485(b) for effectiveness of this Registration Statement and has caused this Registration Statement to be signed on its behalf in the City of Columbus, and State of Ohio, on this 28 th day of April, 2010.

NATIONWIDE PROVIDENT VLI SEPARATE ACCOUNT 1

(Registrant)

NATIONWIDE LIFE INSURANCE COMPANY

(Depositor)

By:  /s/   TIMOTHY D. CRAWFORD

               Timothy D. Crawford

Pursuant to the requirements of the Securities Act, the registration statement has been signed below by the following persons in the capacities indicated on this 28 th day of April, 2010 .

KIRT A. WALKER
Kirt A. Walker, President and Chief Operating Officer, and Director
MARK R. THRESHER
Mark R. Thresher, Executive Vice President and Director
TIMOTHY G. FROMMEYER
Timothy G. Frommeyer, Senior Vice President-Chief Financial Officer and Director
PETER A. GOLATO
Peter A. Golato, Senior Vice President-Individual Protection Business Head and Director
STEPHEN S. RASMUSSEN
Stephen S. Rasmussen, Director
	By:  /s/ TIMOTHY D. CRAWFORD
	Timothy D. Crawford
	Attorney-in-Fact